Payment method employing a bill of exchange

ABSTRACT

A method of paying for a product is traded from a seller to a buyer, wherein a bill of exchange is issued by the seller and accepted by the buyer. The bill of exchange can be payable at a certain future date to the order of the seller at a first financial institution and drawn on the buyer at a second financial institution and becomes a negotiable instrument at the certain future date without reference to the transaction. The method can include: originating the bill of exchange from an originator who is not the seller; signing of the bill of exchange by the buyer then the seller and the seller then issuing of the bill of exchange. The method can also include negotiating the bill of exchange after issuance and on or after the certain future date to effect payment. The bill of exchange can be issued and accepted before a triggering event.

CROSS-REFERENCE TO A RELATED APPLICATION

This application is a continuation of application Ser. No. 09/264,171filed Mar. 5, 1999, U.S. Pat. No. 7,155,409 dated Dec. 26, 2006, theentire disclosure of which is incorporated by reference herein.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to a method of trade financing, which isparticularly, but not exclusively, suitable for use in financinginternational trade between a buyer and a seller resident in differentcountries, and to computerized systems for implementing the method. Theinvention further relates to novel trade instruments, to a novel methodof managing and monitoring an international trade transaction and canprovide novel institutional relationships between commercial, financial,industrial and even government institutions, all of which are useful forenabling or facilitating domestic or international trade transactions.

2. Description of Related Art Including Information Disclosed under 37CFR 1.97 and 37 CFR 1.98

There is often difficulty in obtaining efficient and timely execution ofinternational trade transactions. One difficulty encountered in tradingbetween many buyers and sellers, namely those lacking the advantages ofa trusting relationship built from years of past experience with oneanother, is that the seller is at risk to the buyer's willingness andability to pay. This problem is magnified in international trade bylegal, jurisdictional, linguistic, cultural and other differences,particularly since by definition, international trade is trade betweentwo separate and distinct legal jurisdictions, and often two separateand distinct legal traditions. Unlike a simple store purchase whererelease of the goods to a customer not previously known and trusted bythe seller, is contingent upon receipt by the seller of payment, or of ahighly credible credit card order for payment, in international trade,unless prepayment is received, (an implausible practice on most save thesmallest transactions), the seller is necessarily exposed to unknownshortcomings in the buyer's integrity or resources, by the need to shipgoods or, possibly, supply services, before payment is received. Thegoods or services supplied or goods and services supplied in a tradetransaction are referenced herein as the “traded product”.

Some desirable goals for an improved method of trade financing are asfollows:

-   -   1. that the seller be fully reimbursed promptly after shipping        or otherwise releasing the traded product;    -   2. that the seller not be exposed to possible unwillingness of        the buyer to pay after such release of the traded product from        the control of the seller;    -   3. that the seller receive a negotiable financial instrument        enabling such prompt reimbursement which instrument is not        subject to recourse by the buyer in the case of merchandise        disputes;    -   4. that the financial instrument be one that lends itself to        credit enhancement features providing improved assurance of the        buyer's ability to pay; and    -   5. that permits creditworthy buyers time to pay.

Various methods are of course known to the art for financinginternational trade, and some of them, such as letters of credit, havebeen used for centuries.

A typical open receivable trade financing method is depicted in FIG. 1and commences, in step 1, with receipt by seller S of the buyer'spurchase order specifying the goods to shipped, prices, method ofcarriage and so on. Then the seller ships the goods, step 2 and mailsone or more invoices to buyer B, perhaps following up with a statement,to request payment from buyer B, step 3.

At some unknown subsequent time, buyer B then remits payment to sellerS, step 4, unless in the interim buyer B has decided that he isunwilling to pay for the goods. Seller S is completely dependent uponbuyer B's reputation for creditworthiness and is exposed tounwillingness of the buyert to pay, inability of the buyer to pay,untimeliness of payment, and to the possibility that buyer B may seekrecourse for any one of a number of commercial complaints, for example,shortages, quality complaints, substitutions incorrect items and so on.

In some instances, seller S may be able to insure, or obtain an advanceagainst a pool of their receivables. Insurance usually is effected byobtaining approval from an insuring entity prior to shipment of a poolof invoices addressed to a number of buyers. With the approval in handthe seller ships the goods and collects a discounted advance paymentfrom the funding bank. At some point in the future when the receivablesare collected the seller repays the advance to the funding bank.Liability for uncollected invoices is determined in the advanceagreement as between the insuring entity and the seller.

A useful variation of accounts receiveable financing includes factoring.Referring to FIG. 1B, in receivables factoring the seller assigns theinvoice, passing title therein, to a factor, F1, step 5. At the sametime seller S, notifies buyer B of the assignment and instructs buyer Bto send his payment to factor F1. In step 6 factor F1 advances a partialpayment on the invoice to seller S. In step 7, factor F1, standing inthe place of seller S, collects the invoice receivable from buyer B. Thebalance less the factor's discount or commission is paid to seller S, instep 8.

Clearly, the advantage of factoring for seller S is in step 6 whereseller S receives an advance on the invoice. The drawbacks areessentially the same as the drawbacks of open receivables financing.Additionally the seller runs the risk of having to return the advance tothe factor in the event the invoice becomes uncollectible.

Referring now to the letter of credit procedure shown schematically inFIG. 2, the process commences with exporter seller S and importer buyerB agreeing upon a purchase that will be financed by a letter of credit,“L/C” in the drawing figure, step 1. Buyer B requests buyer B's localbank to initiate a letter of credit, step 2. Typically, as shown in step3 the letter of credit is now forwarded to chain of banks, acting asagents in succession for bank F1. The chain can comprise, for example:F1's correspondent bank F2 in the importer's country; F2's counterpartcorrespondent bank in the exporter's country F3; and F3's counterpartbank F4, local to exporter seller S. Bank F4 notifies seller S of thereceipt of the letter of credit.

When so advised, seller S ships the goods to the order of bank F1, step4. In step 5, seller S forwards the shipping documents to bank F4 anddraws a draft on bank F1. Seller S then submits documents fornegotiation to bank F4 who scrutinizes them for inconsistencies andinaccuracies, and for compliance with regulations such as UCP500.

It is in the nature of the letter of credit process, which is rife withadministrative detail, that 80 percent of the time, bank F4 rejects thedocuments, usually for minor reasons, called discrepancies. Theremaining 20 percent are accepted in the, step 6. In step 7 seller Sresubmits corrected versions of any rejected draft and documents.

Once the documents are approved bank F4 pays the face value of theletter of credit, less charges, to seller S, step 8. Bank F4 releasesthe documents to bank F1 than, step 9 and receives reimbursement, step10. Bank F1, in turn, and releases the documents to buyer B, and obtainspayment, step 11, enabling buyer B to obtain the goods, and clear themthrough customs.

The letter of credit process provides a high degree of security forseller S who is essentially only at risk to the banking system. Theproblems with a letter of credit are its complexity leading to errorsand inconveniences, and the fact that it is singularly unattractive tomany buyers. In many cases buyer B will have to deposit cash orcash-equivalent collateral with bank F1 to obtain issuance of a letterof credit, meaning that buyer B effectively funds the transaction for asignificant period of time to receipt of the goods. Where thetransaction has significant value the requirement for letter of creditcollateral may be a significant constraint on buyer B's liquidity.Rather than receiving time to pay, buyer B effectively has to pay inadvance. The letter of credit process is complex, time-consuming,error-prone and subject to delays, and expensive particularly forsmaller transactions.

The forfaiting process illustrated in FIG. 3, as an example offorfaiting, takes place between an exporter-seller S, an importer-buyerB, a forfait house FH, an avalizor A, an optional holder in due course Hand the buyer's bank BB. Forfaiting is usually for a multi-year term.Thus, in step 1 seller S and buyer B agree, on a multi-year purchaseagreement. Typically, the agreement will provide for quarterly orsemi-annual payments, to be effected by avalized drafts which the sellercan cash at forfait house FH.

In step 2, forfait house FH calculates the individual amounts of thepayments making allowance for interest, and fees applicable to the atrisk party or parties, namely forfait house FH and avalizor A.

In step 3, seller S draws a series of stand-alone drafts, each for afixed amount as calculated by finance house FH in step 2, and forwardsthe drafts to buyer B for acceptance. The amounts may be equal amountsor may vary during the life of the agreement. The drafts are not partialpayments but each represents the extent of the purchasing power extendedto buyer B during the respective quarter or half-year period covered bythe draft.

In step 4 buyer B accepts all the drafts in the series as individualstand-alone documents, without reference to the underlying transaction,and returns the accepted drafts to seller S.

In step 5 seller S has each draft avalized by avalizor A who endorseseach with the phrase “por aval”, thereby guaranteeing payment if buyer Bdefaults. Being now in possession of the avalized drafts which arenegotiable with forfait house FH, seller S ships goods, step 6, asprovided in the purchase program agreed in step 1.

In step 7, the complete series of avalized drafts is sold to forfaithouse FH at a discount. Optionally, step 8, forfait house FH may sellthe avalized drafts to a holder in due course, in which case forfaithouse FH endorses the back of each draft to holder H.

In step 9, forfait house FH, or holder H, presents the avalized draftfor payment, on the due date, to buyer's bank BB, and receives paymentfor all honored drafts. In step 10, forfait house FH, or holder H,presents each dishonored draft for payment to avalizor A under the aval.

In such a forfaiting process, seller S has little exposure being at riskonly to recognized financial institutions that provide the functions offorfait house FH and avalizor A. Also, buyer B receives credit. However,the process is expensive requiring significant discounts to engage theparticipation of both forfait house FH and avalizor A. Also, forfaitingis a long-term, complex process not suited to financing smaller,individual import-export transactions. Typically, forfaiting is used tofinance multiple payments for long term large capital goods purchases tomore closely match the payment cycle to the financial returns earned bythe underlying capital equipment. It is typically applied to three toseven-year terms for transactions valued in the millions of dollars. Aswith a letter of credit, buyer B may have to furnish collateral toavalizor A, adversely affecting buyer B's liquidity. Furthermore,forfaiting is a specialist activity requiring forfait house FH andavalizor A to enter into a multi-year commitment to buyer B whosefortunes change over the years. Forfaiting is therefore not suitable formany buyers who may be quite creditworthy for the duration of a singletransaction, but are not sufficiently established and durable to justifylong-term confidence.

The patent literature contains some proposals for new financing ortrading methods and systems. For example, Potter et al U.S. Pat. No.5,787,402 teaches a method for automating foreign currency transactions;Custy U.S. Pat. No. 5,774,879 teaches a method for automated financialinstrument processing, and Harris et al. in U.S. Pat. No. 5,517,406teaches a trade processing system for mutual fund transaction requests.None of these prior proposals is remotely relevant to applicant'sobjectives.

Tozzoli et al. in U.S. Pat. No. 5,717,989 teach a method of facilitatinginternational trade in goods, which method avoids the use of a letter ofcredit, and the presentation and manual processing of documentation forcompliance therewith. However, Tozzoli's lacks teaching regarding theuse of a new payment instrument to finance international trade, and doesnot employ bills of exchange. Tozzoli's system addresses problems thatarise from documentary discrepancies in trade transactions and seeksreduction of the delays and costs involved in financing trade byautomated comparison of purchase order data, contract data and shipmentdata to generate payment due data (see claim 1). Tozzoli does not appearto provide any new trade financing method or instrument which helpssolve the problem of financing a buyer while reducing the seller'sexposure to risk after release of the product being traded.

U.S. Pat. No. 5,694,552 recently issued to Aharoni discloses a financingmethod and employing what is described as a new use of at least onetrade acceptance draft. Aharoni's method is a buyer-oriented methodwhich contemplates that buyer will pay for goods and/or servicesreceived from seller S with one or more buyout-executed in tradeacceptance drafts. Subject to various conditions, these drafts arenegotiated by seller S with a financial organisation FO. Referring tothe block flow diagram of FIGS. 4A-4B, Aharoni's method commences instep 1 with seller S and financial organisation FO concluding a draftacceptance agreement defining the terms under which financialorganisation FO will purchase accepted drafts from seller S, see column2, lines 40-55. The drafts are to be purchased after shipment of goodsor delivery of services (only “goods” will be referenced hereinafter, itbeing understood that services and may be alternatively or additionallyintended). The agreement is generic in that no specific buyer iscontemplated. Thus, there can be no approval of a specific buyer'scredit before the agreement is concluded.

In step 2, after soliciting a willing buyer B, Aharoni concludes apurchase agreement with the buyer B, called a “TAD Program Agreement”,in which buyer B agrees to pay for the goods with one or morebuyer-accepted trade drafts, see column 2, lines 59-64. Buyer B nowsends seller S a purchase order, step 3, see column 3, lines 37-38 andcolumn 4, lines 51-52. Because buyer B's credit has not yet beenchecked, seller S has to request pre-approval from financialorganisation FO of the proposed sale defined by the purchase order, step4, see column 3, lines 39-42 and column 4, lines 53-54. If financialorganisation FO denies approval, the transaction is aborted, step 5, seecolumn 3, lines 45-46.

In step 6, financial organisation FO pre-approves the proposedtransaction, see column 3, lines 43-45 and column 4, line 55, enablingseller S to ship the goods, step 7. In step 7, in addition to shippingthe goods to buyer B, seller S also sends buyer B one or more tradeacceptance drafts to be used for payment, see column 3, lines 47-53, andcolumn 4, line 56. In step 8 if buyer B does not accept the goods ordoes not sign the draft or drafts, financing is aborted and seller Smust have recourse to the purchase agreement to obtain payment directlyfrom buyer B, see column 3, lines 57-61.

In step 9, buyer B accepts the goods and then subsequently confirms itsacceptance by signing the drafts and returning them to seller S, seecolumn 3, lines 54-55 and column 4, lines 57-58. Seller S endorses eachdraft on the back of the document and tenders it to financialorganisation FO for purchase, step 10, see column 3, lines 62-65 andcolumn 4, line 60. Financial organisation FO then checks buyer B'scredit for changes since step 6, and if an adverse report is received,declines to purchase the drafts, step 11, see column 3, lines 66-67.Once again, in this eventuality, seller S must resort to direct dealingswith an unwilling or unable buyer, in order to obtain payment.

In step 12, if a favorable report is received, financial organisation FOpays seller S an advance on the draft or drafts, not the full value ofthe drafts see column 4, lines 1-5, and column 4, lines 61-64. Whereseller S has gone to the expense of obtaining credit insurance,financial organisation FO pays the balance to seller S, in step 13 seecolumn 4, lines 5-8. Otherwise seller S must wait until financialorganisation FO requests payment from the buyer bank BB, step 14, seecolumn 4, lines 9-12 and column 4, line 67 to column 5, line 3-58. andreceives that payment before the balance is paid, step 15, see column 4,line 17, and column 5, line 4. In step 16, if financial organisation FOis not paid, seller S has to return the advance received in step 12, seecolumn 4 lines 27-33.

The problem with Aharoni is that, after shipping the goods, seller S isrepeatedly at risk to buyer B's unwillingness or inability to pay. Thus:in step 8, if buyer does not accept the goods or sign the drafts,finance is aborted; in step 11 if an adverse credit report is received,financial organisation FO will not purchase the drafts; and in step 16,if financial organisation FO cannot collect from buyer's bank, theadvance must be returned. Accordingly, seller S may suffer the cost ofreturned goods, and a lost order, or the burden of an unfinancedtransaction with a high probability of a delayed or incomplete payment.

There is thus a need for a new method of trade financing which providesfor the seller to be fully reimbursed promptly after releasing ordelivering the traded product, which avoids exposing the seller tounwillingness of the buyer to pay for the released product and whichpermits creditworthy buyers to have time to pay. There is also a needfor new and simple financing instruments which can facilitate attainmentof these desirable objectives, sor computer implementable systems andmethods for enhancing the trade financing process and for takingadvantage of the benefits of Internet implementation.

BRIEF SUMMARY OF THE INVENTION

The present invention solves a problem. It solves the problem ofproviding a trade finance method wherein a seller receives a negotiablefinancial instrument in payment for a traded product, promptly afterrelease of the traded product from the seller's control, allows thebuyer time to pay and yet is not exposed to the possibility that thebuyer becomes unwilling to pay after the traded product has beenreleased from the seller's control. Preferred embodiments of theinvention also solve, mitigate or help manage, problems that may arisefrom a willing buyer's inability to pay.

In one aspect, the invention solves this problem by providing a tradefinance method for financing the sale of a traded product wherein, priorto supply of the traded product by the seller, the buyer provides to theseller or the seller's agent, a buyer-executed payment draft orderingpayment, in the amount of the value of the traded product, to be made ata future date triggered by a future event. The future event is, forexample an event related to release of the product from the seller'scontrol, for example, the date of supply of the traded product. It couldhowever be a buyer-related event, for example availability of certainfunds to the buyer, perhaps the proceeds from an asset sale.

The payment draft is thus a prerelease payment draft, issued prior torelease of the product by the seller or prior to such other triggeringevent as may be determined or agreed by the seller or buyer. Yet thepayment draft is not a pre-payment. For one reason it is not immediatelynegotiable, because it is a latent draft which is for the momentinactive, becoming active when the triggering event occurs. Unlike aconventional pre-payment where the seller can obtain the proceeds beforeshipment, with the inventive method, if the seller does not cause thetriggering event to occur, (assuming the event to be seller-controlled,which is preferred but not essential) the prerelease payment draft isnot activated and cannot be cashed or otherwise negotiated. Unlike apost-dated check, whose date may pass before the event occurs, theevent-triggered draft employed in the invention does not put the buyerat risk.

Furthermore, under most accounting standards, the pre-release paymentdraft is neither an asset nor a liability to be reported on theirbalance sheet, either for the seller or the buyer. Thus the inventivemethod has the additional advantage of providing off-balance-sheetfinancing.

For these and other reasons, the method of the invention, employing asit does a novel instrument, a prerelease, event-triggered, paymentdraft, is attractive to the buyer. Because the draft, executed oraccepted by the buyer, evidences the buyer's willingness to pay, isunder the seller's control, being in possession of the seller or theiragent, and can become activated, as a legal obligation, when the sellerreleases the product, the method is also attractive to the seller who isthus protected from the risk that the buyer will decide not to pay. Timefor the buyer to pay can be provided by giving the prerelease paymentdraft a tenor or maturity at a date certain calculated as a fixed termrunning from the triggering event.

Preferred embodiments of the invention comprise methods of conductingexport and import trade transactions employing a pre-release draft. Themethods can be exporter-controlled or importer-controlled, dependingupon the capabilities and wishes of the parties to the transaction.

Further preferred embodiments of the invention provide for pre-approvedconversion of the pre-release buyer-accepted trade draft to a banker'sdraft, for use of a second of exchange mutually extinguishable with thepre-release payment draft to facilitate the payment process and enhancethe collateralization of the transaction, and for use of an enhancedpro-forma invoice or enhanced purchase order setting forth relevantagreement terms which also facilitate the transaction. Preferred suchterms provide for removal of trade disputes from the payment cycle andagreement to use the pre-release payment draft of the invention forpayment for the traded product. Preferably, the pro-forma invoice orpurchase order, enhanced with such terms, is executed by the buyer andreceived by the seller prior to the transaction triggering event.

The novel methods and instruments of the invention provide a beneficialtrade financing process which is flexible and valuable for both largeand small, domestic or international transactions, providingsimplification, control and enhancement of the financing, payment anddocumentation processes traditionally involved in commercial tradetransactions.

The benefits of the invention can be especially helpful in simplifyingthe paperwork and reducing the costs of small export or importtransactions and may make smaller export or import transactions morefeasible than they have been in the past, especially for an exporter orimporter wishing to conduct a number of such relatively smalltransactions.

In a further aspect, the invention provides novel financial instrumentsthat are useful in practicing the novel trade financing methodsdescribed herein, as will be made apparent hereinbelow. Still furtheraspects of the invention provide computer-implementable methods ofmanaging and monitoring a trade finance process in a manner suitable foradministration by a third party administrator, and also provide computersoftware and systems for implementing the methods disclosed herein. Suchmethods include the use of distributed workflow management software tocoordinate software procedures for implementing the invention with therequirements of preexisting treaties, and their successors, and industrypractice, in a manner consistent with the business agreements betweenthe buyer and the seller and with their business objectives.

BRIEF DESCRIPTION OF THE SEVERAL VIEWS OF THE DRAWING

One or more embodiments of the invention and of making and using theinvention, as well as the best mode contemplated of carrying out theinvention, are described in detail below, by way of example, withreference to the accompanying drawings, in which:

FIG. 1A is a block flow diagram of one prior art method of internationaltrade financing which method employs open receivables financing;

FIG. 1B is a block flow diagram of another prior art method ofinternational trade financing which method employs factoring;

FIG. 2 is a block flow diagram of another prior art method ofinternational trade financing which method employs letter of creditfinancing;

FIG. 3 is a block flow diagram of a further prior art method ofinternational trade financing which method employs forfait financing;

FIGS. 4A and 4B are partial views, to be read as one, of a block flowdiagram of a still further prior art method of international tradefinancing according to the patent to Aharoni;

FIG. 5 is a block flow diagram of one method of trade financingaccording to the invention;

FIG. 6 is a schematic representation of a bill of exchange useful inpracticing the method shown in FIG. 5;

FIGS. 7 and 8 are partial views, to be read as one, of a block flowdiagram of a further method of international trade financing accordingto the invention;

FIG. 9 is a flow diagram showing the movements of a first bill ofexchange employed in the method illustrated in FIGS. 7-8;

FIG. 10 is a flow diagram showing the movements of a second bill ofexchange employed in the method illustrated in FIGS. 7-8;

FIG. 11A illustrates an example of a first of exchange document usefulin the practice of the invention;

FIG. 11B illustrates an example of a second of exchange document usefulin the practice of the invention;

FIG. 11C illustrates an example of a pro-forma invoice document usefulin the practice of the invention;

FIG. 12 is a schematic block diagram illustrating the functionalrelationships between the parties in an export trade transactionfinanced according to the method of FIGS. 7-8, with optionalcomputer-implementation;

FIGS. 13, 14 and 15 are partial views, to be read as one, of a blockflow diagram of a illustrating the process flow of another embodiment ofa computer-implementable trade financing method according to theinvention, for financing import-export transactions between an exporterE and one or more importers I, with the assistance of a third partyadministrator TPA;

FIG. 16 is a schematic block diagram of another embodiment ofcooperative computerized systems pursuant to the invention implementedto execute an export trade transaction and employing a credit cardcompany subsidiary; and

FIG. 17 is an illustration of a computer screen displaying a module of adocument image work flow management system according to the invention.

DETAILED DESCRIPTION OF THE INVENTION

In accordance with the invention a method for moving goods and/orservices from a seller to a buyer and involving the transport of goodsor a report or other like document or thing is provided. At the sametime, the invention assures the movement of a payment for the goodsand/or services from the buyer to the seller. This is done by the buyerexecuting a first document having indicia purporting to legally bind thebuyer upon the happening of an event. The buyer sends to the seller thefirst document having those indicia purporting to legally bind the buyerupon the happening of that event.

In accordance with the invention, the buyer executes a second documenthaving indicia indicating information describing a commercialtransaction and sends to the seller the second document having indiciaindicating information describing that commercial transaction. Theseller notifies a financial institution respecting the execution andsending of the first document having indicia purporting to legally bindthe buyer upon the happening of the event. The second document hasindicia indicating information describing a commercial transaction. Thefinancial institution transmits to the seller a transaction approval.

At the appropriate time normal in his business, the seller causes theevent to occur. Typically, this event is the shipping of goods. Theseller sends to the buyer's transaction interface a third documententitling the holder of the third document to those goods or the reportor other like document or thing. The seller also sends a fourth documenthaving indicia purporting to legally bind the buyer upon execution ofthe fourth document and the happening of the event. The fourth documentis presented to the buyer, and the buyer executes the fourth document.

The executed fourth document is exchanged for the third document,whereby the executed fourth document is in the possession of the buyer'stransaction interface. The third document is in possession of the buyer.The seller provides the first document to the financial institution, andthe financial institution issues a fifth document purporting to obligatethe financial institution to pay the seller a second payment.

In accordance with the invention it is contemplated that the secondpayment is the payment less a service fee.

It is also contemplated that the buyer notifies an administratorrespecting the execution and sending of the first document havingindicia purporting to legally bind the buyer upon the happening of thetriggering event and the second document having indicia indicatinginformation describing a commercial transaction. The event may be thetransporting of goods or performance of services and it may embody suchperformance in a report or other like document or thing.

The fourth document may be a second of exchange, and the third documentmay be an invoice. The second document having indicia indicatinginformation describing a commercial transaction may be a pro-formainvoice.

The event which triggers the legal obligation of the seller may also bethe seller's parting with physical control of the goods or the seller'sperforming the services. The first document may be a first of exchange,and the execution of the first document may be done by ink signature,facsimile signature, or electronic signature. The electronic signaturemay be the product of a confidential algorithm specific to the buyer,and the confidential algorithm may be responsive to an identificationnumber associated with the buyer and the date of the signature. Theindicia may be printed with ink on a sheet of paper or other similarmaterial, or the indicia and the document may be electronic.

Also in accordance with the invention there is provided a method forelectronically monitoring and controlling the movement of goods and/orservices from a seller to a buyer. It involves the transport of goods ora report or other like document or thing of value, and electronicallyexecuting a payment for the goods and/or services from the buyer to theseller.

The buyer, the seller, a financial institution, and a buyer'stransaction interface are electronically connected over an informationtransport system. This is done by the buyer electronically sending tothe seller a first packet or packets of information performing thefunction of a conventional executed document having informationpurporting to legally bind the buyer upon the happening of an event. Thebuyer then electronically sends to the seller a second packet or packetsof electronic information performing the function of a secondconventional executed document having information describing acommercial transaction. The seller then sends a notification packet orpackets of such electronic information to the financial institutionrespecting the sending of the first and second packet or packets ofelectronic information. The financial institution transmits to theseller a packet or packets of electronic information performing thefunction of a conventional transaction approval. The seller then causesthe event to occur and sends to the buyer's transaction interface athird packet or packets of information entitling the buyer's transactioninterface to the goods or the report or other like document or thing.The seller also sends a fourth packet or packets of information whichinclude transaction information which purport to legally bind the buyerupon acceptance by the buyer of the terms of the fourth packet orpackets of information and the happening of the event.

The invention further contemplates transaction information contained inthe fourth packet or packets of information being presented to thebuyer, and the buyer accepting the terms of the transaction information.The fourth packet or packets of information, amended to note theacceptance of the terms of the transaction information by the buyer, allart sent in exchange for rights associated with the third packet orpackets of electronic information, whereby rights created by theacceptance by the buyer of the terms of the transaction information arein the possession of the buyer's transaction interface and rightsassociated with the third packet or packets of information are in thepossession of the buyer.

The seller then provides the first packet or packets of information tothe financial institution, and the financial institution transmits afifth packet or packets of electronic information purporting to obligatethe financial institution to pay the seller a second payment.

The method may also contemplate the buyer's transaction interfacesending to the financial institution a sixth packet or packets ofelectronic information advising the financial institution of the receiptby the buyer's transaction interface of the third packet or packets ofinformation.

The method may also contemplate the buyer's transaction interfacesending a seventh packet or packets of electronic informationrepresenting a third payment. It may also comprise the financialinstitution sending an eighth packet or packets of electronicinformation representing a fourth payment to the holder of rightscreated by the fifth packet or packets of electronic information.

The financial institution may also be the seller's bank, and the buyer'stransaction interface may be in the buyer's bank.

The first packet or packets of electronic information may perform thefunction of a first of exchange, the second packet or packets ofelectronic information may perform the function of a pro-forma invoice,the third packet or packets of electronic information may perform thefunction of an invoice, and the fourth packet or packets of electronicinformation may perform the function of a second of exchange.

In the preferred embodiments of the invention, the prerelease paymentdraft is addressed to a suitable paying party, for example the buyer'sbank, or such other institution or party as is agreeable to the sellerand buyer. The prerelease payment draft can be payable to the seller, tothe seller's agent, to the bearer, to a party collecting on behalf ofthe seller, or to other such party as may be mutually agreed by thebuyer and seller. Preferably, the prerelease payment draft istransaction-independent but identifies a specific transaction betweenthe buyer and seller for the traded product, e.g by code or other uniqueidentifier. The term “transaction-independent” is used herein, unlessthe context indicates otherwise, to mean that settlement of a draft, orother such negotiation of the draft, is not dependent upon any facet ofthe transaction such as completion of delivery, or support, or thequality of the product supplied and is dependent only upon the terms ofthe draft itself. Activation of the draft is however dependent on thetriggering event which will usually be transaction related.

The invention provides a novel financial instrument comprising aprerelease bill of exchange which is accepted in advance by acounterparty, for example the buyer, and is returned to an originator,for example the seller, as evidence of willingness to pay the originatora sum certain of money at a specific point in future time, such time tobe determined by a pre-specified triggering event.

For the purposes of this invention it is preferred that the pre-releasepayment draft be signed, or otherwise authorized manually,electronically, or digitally, by both parties to the transaction, forexample, the originator and a counterparty. However the sequence inwhich the signatures, or other authorizations, are applied to the draftcan vary.

Usually, it will be more convenient for the originator to sign first andfor the counterparty to sign subsequently. In a sell-and-buytransaction, the originator may be either the seller or the buyer. Wherethe originator is the seller, a preferred sequence is for the seller tooriginate and sign the pre-release payment draft and forward the draftto the buyer as counterparty. The buyer should then sign the draft,indicating acceptance thereof and return it to the seller, prior to thetriggering event. Where the buyer originates the pre-release paymentdraft, the buyer can sign the draft indicating acceptance thereof andforward it to the seller, prior to the triggering event. The seller willpreferably then sign the draft subsequently to the buyer, but prior tonegotiating the payment draft with a financial institution or otherparty. Preferably, seller executes the pre-release payment draft beforethe triggering event occurs and optionally, forwards a copy of thedraft, bearing both signatures, to the buyer.

Thus, the sequence of events can be determined, in practice, as betweenthe parties, each acting in their respective roles, and allowing theagreement process to be incomplete until both parties act. There is noobligation on either party if one or the other of the parties fails toact, until the agreement process has been completed by both partiessigning the pre-release payment draft or otherwise acting in what is toeach other, an expected and acceptable manner. Preferably also,execution by the buyer and optionally, the seller, of anyterms-containing document accompanying the payment draft should be aprerequisitie of completing the agreement to trade.

Conveniently, where the originator is the seller, the transaction can bedefined by a pro-forma invoice detailing the goods or servicescomprising the traded product and preferably also incorporatingpreferred terms of the agreement between the buyer and the seller.Alternatively, where the originator is the buyer, the details and termsof the agreement may be incorporated in a purchase order. Whether thetrade is defined by a pro forma invoice or a purchase order may be amatter of agreement or custom as between the buyer and seller. In a verygeneral way, subject to many exceptions, it may be said that largerentities such as blue-chip corporations, utilities and governmententities will prefer to determine their own terms and be the originator,issuing either a pro-forma invoice, or a purchase order, according tothe nature of the transaction and pursuant to the invention, also beingthe originator of a pre-release payment draft, which is preferablylinked to the pro-forma invoice or purchase order by reference thereto.

Thus, in the case of an import-export transaction, the process may beinitiated and controlled either by the exporter or the importer, actingas originator of the payment draft. An exporter-seller can use apro-forma invoice to define the transaction, while an importer-buyer mayuse a purchase order.

It will be understood that an export transaction is a mirror image of animport transaction and that a complete transaction comprises an exportof a traded product from one country or region and the import of theproduct into another country or region. In an export transaction, aproforma invoice, invoice, and shipment of goods are initiated,implemented or effected and controlled by the exporter, whereas apurchase order is neither generated nor controlled by theexporter-seller, and may raise issues regarding item numbers ordescriptions of parts in the importer's terms rather than theexporter's.

The opposite is true for an importer. To an importer, particularly forproducts coming from a catalog with specific descriptions, parts numbersand per piece prices quoted in advance, a purchase order is in thecontrol of the importer, and can accurately be constructed to reflectthe terms and conditions under which the importer wishes to buy goods.Thus, many importers may prefer to control the transaction and may doso, pursuant to the invention by employing a purchase order toimplement, effect or control the process in an equivalent manner to theway in which an exporter can use a proforma invoice.

The prerelease bill of exchange, accepted by the counterparty, thebuyer, prior to the triggering event, indicates a willingness and intentof the counterparty to pay. The ability of the counterparty to pay maybe determined in a number of ways. Outside credit verification agenciesmay be employed, to evidence the counterparty's ability to pay. Someagencies may also provide credit enhancement. The combination ofwillingness to pay and ability to pay create collateral value in thenovel payment instrument, the prerelease buyer-accepted bill ofexchange. The signed statement of time-specific intent to pay enhancesthe collateral value.

The method and novel instruments of the invention are particularly, butnot exclusively, useful for financing an international tradetransaction, wherein a buyer purchases a trade product from a selleracross an international border or borders, for example to export from,or import to, the United States.

Preferably also, the payment draft is readily negotiable, throughconventional banking or other financial channels, for the full value ofthe traded product, less any fees and discounts. In a preferredembodiment of the invention, the payment draft is a bill of exchange andsubsequent to the date of supply of the traded product, is converted toan enhanced financial instrument, for example a banker's acceptance,which is more readily negotiable than a buyer-executed payment draft. Byprior arrangement with the financial institution issuing the enhancedinstrument, the payment draft may be pre-approved, simplifying theconversion process and quickly yielding the seller a pre-approved drafton a financial institution, e.g. a pre-approved banker's draft, which,once accepted, can be internationally negotiated, without unduedifficulty for cash or a cash equivalent. These and other steps in themethods of the invention can be managed or facilitated bycomputer-implemented software, which can be operated by a trade financeprocess manager being an individual or organization additional to theseller, the buyer and the financing institution.

A further problem solved by a preferred embodiment of the invention isthat of timely providing the seller with a financial instrument which isnot only readily negotiable, but which is independent of the tradetransaction, does not depend upon the seller to extend credit and isnon-recoursable by the buyer, which is to say free of merchandise claimson the seller by the buyer.

Preferably, the right of recourse is removed from the payment cycle byagreement between the buyer and the seller, which agreement ispreferably also specific to a single transaction or to a series oftransactions between the same buyer and seller, and is completed priorto release of the traded product. In an important preferred embodimentof the inventive method the buyer and seller contractually agree tosettle merchandise disputes, outside the payment process, according toindependently devised and recognized rules, for example the League ofNations 1930/1931 convention on payments (Convention Providing a UniformLaw For Bills of Exchange and Promissory Notes, Geneva, 1930, presentlyavailable on the Internet athttp://ananse.irv.uit.no/trade_law/doc/Bills.of.Exchange.and.Promissory.Notes.Convention.1930.html). Other equivalent and suitable internationaltreaties, national laws or recognized reference documents may beinvoked, if desired, for this and other purposes to facilitate thetransaction and avoid disputes. Some suitable examples are furtherdescribed hereinbelow. Use of such an international convention, or thelike, is particularly valuable for international trade transactions,providing a balanced and fair resolution mechanism that is widelyrecognized and acceptable to residents of many nations.

In a still further particularly preferred embodiment of the inventionthe seller furnishes the buyer a pro-forma invoice prior to release ofthe traded product. Conveniently, the pro-forma invoice defines theparticulars of the product to be traded, including pricing and shipping,if appropriate, and its details can be negotiated to the buyer'ssatisfaction. Preferably the pro-forma invoice includes an agreementthat the buyer will pay against a sole first or a second bill ofexchange and includes a non-recourse agreement, for example an agreementsuch as that described above, to remove trade disputes from the paymentcycle, referencing a suitable international convention. The pro-formainvoice preferably is signed by both the buyer and seller before releaseof the traded product. Conveniently, the pro-forma invoice accompaniesthe prerelease payment draft proffered to the buyer prior to shipment.Preferably, also, the prerelease payment draft references the pro-formainvoice to define the traded product. Alternatively, but lessconveniently, these particulars and agreements could be incorporated ina purchase order furnished by the buyer. The name of the document, andeven the issuer, can be varied. What is desirable for a preferreddocument is that it define the transaction with particularity andinclude payment and non-reecourse agreements such as those describedabove.

In one preferred embodiment, the prerelease payment draft is a bill ofexchange accepted by the buyer which, being executed, on, at or beforerelease of the traded product by the seller, or their agent, may bedesignated a prerelease bill of exchange. Once executed and accepted, bythe buyer, the bill of exchange becomes a trade acceptance. Optionallyand preferably, but not necessarily, the prerelease bill of exchange isthe first of two similar, mutually extinguishable bills of exchange,respectively designated a “first of exchange” and a “second of exchange”herein, each of which is payable only when the other remains unpaid.Preferably also, the first and second of exchange are created, insequence, at different times, yet have identical maturity dates. Thisnovel use of two similar, mutually extinguishable bills of exchange,pursuant to the invention permits enhancement of the collateralizationof the credit extended to the buyer. Use of two interdependent bills ofexchange enables one, preferably the first, to be held as collateral inone location while the other, preferably the second, is used forcollection. By virtue of the mutual extinguishability feature,collection made on the second bill of exchange automaticallyextinguishes the collateral provided by the first, without any furtheraction being required.

The term, or “tenor” of the prerelease payment draft, calculated fromthe release date, or other specified event date, to the maturity date,can be any suitable term as agreed between the buyer and seller. Thetenor can for example be 30 days, but may be somewhat longer, forexample 60, 90 or 180 days, depending upon the credit term required bythe buyer. In practice longer terms are unlikely to be appropriate, butthe invention is of course not limited to any particular tenor. Whilethe invention contemplates that the prerelease payment draft willusually be a time draft, it will be understood that the payment draftcould be payable on demand after supply of the traded product, such arequirement, calling for prompt or immediate payment to be made by thebuyer to the addressee, for example by debiting the buyer's account.Though not yet fully developed, electronic payment employing electronicmeans and electronic document interchange standards, such as the ANSIX12 standard, EDIFACT or SWIFT, with suitable authentication canfacilitate such payment on demand.

The method of the invention enables the seller to obtain paymentpromptly after releasing, delivering, shipping or otherwise supplyingthe traded product, by negotiating the buyer-executed prerelease paymentdraft, yet at the same time provides a creditworthy buyer with time topay. A buyer's natural reluctance to prepay a seller is overcome bymaking the payment draft activatable upon an agreed specific triggeringevent occurring after execution of the draft by the buyer, for examplerelease of the product. The term for payment is then calculated from thedate of the event.

The event can, in most cases be the date when the traded product isreleased from the seller or possibly, particularly in the case ofservices, the date of delivery to the buyer. Other pertinent eventscould however serve to activate the draft, for example progress ofmanufacture of the product to an agreed stage or a buyer-related event,such as receipt of proceeds of an asset sale. Release of the tradedproduct from the seller's control should then await news of occurrenceof such a buyer-related event. Alternatively, the triggering event mightitself be a future date certain. In such case the buyer may need asafeguard against possible failure of the seller to release or deliverthe traded product in a timely manner. If the triggering event does notoccur, for example, because the seller fails to release the tradedproduct, the payment draft is inactive and worthless, the buyer losesnothing. The buyer gains the advantage of prepayment (inducement for theseller to release the product) without having to worry about retrievinga prepayment if the seller reneges or is otherwise unable to fulfiltheir offer.

Release of the traded product (goods or services or a combinationthereof) by the seller can be effected by delivery of the traded productto the buyer or the buyer's agent, or to a carrier, or by such otherstep as releases the product from the control of the seller, or itsagent, to the control of the buyer, or its agent with instructions forthe product to be delivered or supplied in accordance with the buyer'swishes.

Because, in most cases, by the nature of the draft, no maturity date canbe determined until after the traded product is released from thecontrol of the seller, the payment draft is not activated, or triggered,and therefore is not normally negotiable through conventional channels,until after the traded product is shipped, delivered, or otherwisereleased by the seller. By providing documentary evidence of suchrelease, for example shipping documents, along with the payment draftduly executed by the buyer, in many instances the payment draft can thenbe processed through conventional banking channels in the manner of atrade acceptance drawn on the buyer, providing immediate payment to theseller, subject to conventional discounts.

In a preferred embodiment of an import purchase order process, accordingto the invention, the pre-release payment draft is a bill of exchangeaccepted by the buyer at the time of the issuance of the purchase orderwhich specifies the terms, conditions and triggering event or eventsunder which the seller may actuate the bill of exchange at a later date,by performing the agreed upon acts specified in the purchase order.

In such a purchase order implementation process, the buyer signs theacceptance portion of the bill of exchange as if the seller, asoriginator, had supplied the document to the buyer. Since the buyer isordering the goods, and intends to pay under terms and conditionsmutually agreeable between buyer and seller, and is in fact the payingparty, then the buyers's early acceptance of the bill of exchange isconfirmation of the buyer's willingness to pay. The seller as inprevious examples, still must determine the ability of the buyer to pay,and must agree to the terms and conditons that will trigger payment.

There is no obligation to pay, until and unless both parties sign thebill of exchange. Whether the seller signs first or the buyer does isnot relevant, so long as both parties sign the document. Then, the factthat both have signed means that they have agreed both to the terms andconditions of the underlying transaction which supplies a triggeringevent, and to the method and timing of payment as set forth or impliedin the documents.

Accordingly, a purchase order-driven transaction, whether it be across aforeign border or a domestic transaction within a national or regionaljurisdiction, can be managed and controlled, with the assistance ofelectronic document generation, in a comparable manner to the way inwhich business-to-business checks are now issued by many businessesemploying shrink-wrapped software packages. In this light, the inventioncontemplates a novel capability, whereby a purchase order is combinedwith a two-signature bill of exchange, preferably on a single sheet ofpaper, optionally separated by a perforation, like a business check andremittance advice, and preferably also of a similar size and shape tosuch a business check. A more particularly preferred embodiment of sucha purchase order-draft emobdies the invention as described herein withregard to relevant agreement clauses in the purchase order and atriggering event in the draft.

By leaving the issuance date blank, the accepting party can allow theissuer as issue to fill in the date of the triggering event as specifiedin the purchase order and to sign as issuer after the accepting partyhas signed as acceptor.

The acceptability of such a document should depend solely on theaccepting party's willingness and ability to pay upon presentation ofthe document. Since the transaction contemplated is initiated,implemented, effected or controlled by the accepting party, they are thesole determiner of the use of such a document and can issue it at will.

Another valuable and preferred embodiment of the invention provides avalue-enhancing mechanism to improve the negotiability and the value ofthe trade acceptance constituted by the buyer-executed payment draft.For example, prior arrangement can be made with a bank or otherfinancial institution to substitute a banker's acceptance for the tradeacceptance. Such a banker's acceptance, or bank draft, will usually bequickly, readily and economically negotiable, especially if the bank isinternationally recognized. Preferably, credit enhancement, or a creditenhancement process, is offered to the bank or other financialinstitution, as an inducement to make the substitution.

Referring now to FIGS. 5 and 6 of the drawings, the method of tradefinancing shown commences in step 1 with an agreement for a buyer B topurchase a traded product from a seller S. Without limitation seller Scould, for example, be an exporter of manufactured goods from the UnitedStates, or any other country, while the buyer is an overseas importer ofsuch goods into another country, for example, Japan. Alternatively, thedomiciles of the buyer and seller could be reversed.

In step 2, after prices and product specifications have been agreed, butbefore product is released, pursuant to the invention, buyer B signs aprerelease payment draft 10 and returns it to seller S who withholdsrelease of the product until the signed draft 10 is received by seller Sor its agent.

Referring now to FIG. 6, one form of suitable prerelease draft 10 isshown as being a bill of exchange designed for creation and acceptanceprior to release of goods or services. The particulars are believedlargely self explanatory, noting that variable items are shown inparentheses. An amount 12 is the full value of the transaction, i.e. ofthe cost to the buyer of the traded product, with or without freight andinsurance, and with or without interest, depending upon the terms of thepurchase agreement made in step 1. Date 14 is the date of issuance ofprerelease draft 10 and can be presumed to be the date when the seller'ssignature 16 is applied.

Prerelease draft 10 is payable to the order of a collecting bank 18which may be designated by the seller and may be a bank with which theseller has made a prior arrangement for negotiating the draft.Prerelease draft 10 is drawn on B's account 20 at B's bank, and chargedto B's account, but could be drawn on other financial institutions andaccounts, if so desired by the buyer or seller.

Of note is that payment draft 10 calls for the buyer's signature 22 tobe applied, indicating acceptance of payment draft 10 by the buyer. Whensigned by the buyer payment draft 10 becomes a trade acceptance. Thedate 24 when buyer B's signature 22 is applied is independent of thedate of application of seller S's signature and commonly, but notnecessarily, will be a later date. Prior to application of B's signature22, prerelease draft 10 comprises an offer to do business by the seller,on condition of payment within a term to be triggered by the event ofrelease, shipment or delivery of the traded product, whichever isspecified.

In the event that release by the seller, or its agent, to the control ofthe buyer, or its agent, of goods or services is instantly preceded byacceptance of the draft, as a condition of release, as contemplated bythis invention, then the tenor of the draft, which is the time topayment, may be “at sight”.

In the example shown, the term 26 of prerelease draft 10 runs from theshipment date, event 28. Accordingly, prerelease draft 10 is dormantuntil the traded product is shipped, which event activates the draft.Proof of shipment will usually be required to negotiate prerelease draft10. A transaction window 30 can contain transaction identifiers thatpermit identification of the transaction agreed in step 1 and theparticulars can be memorialized in a separate document, for example apro-forma invoice, as described hereinbelow. Exemplary transactionidentifiers in transaction window 30 can comprise a selection of one ormore from an exporter identification number, a proforma invoiceidentification number, a credit insurance company's control number, aninvoice number, a shipment number, a customs internal tracking number“ITN” and an importer identification number, as well as, for trackingpurposes, a 1oE/2oE notation to indicate the nature of the bill. Thoughdesignated “number” those skilled in the art will understand that analphanumeric, or alpha only identification code may be used, if desired.Preferably, all the identifiers are used. Also, if desired, paymentdraft 10 can bear its own identification code, bill identifer 32.

This transaction information can be employed to ensure that anyparticular shipment is the proper shipment to activate prerelease draft10 and the completeness of the transaction identifiers indicates theprogress of the transaction on the bill. Once activated, prereleasedraft 10 is transaction independent, save for calculation of its termfrom the transaction shipment date, and thus may be freely negotiatedwithout further reference to the transaction status, as is customary fora bill of exchange.

Prerelease draft 10, designed for issue and acceptance, on, at, before,or in anticipation of, release, shipment or delivery of the tradedproduct, or service, constitutes a novel financial instrument pursuantto the invention.

Standard practices for bills of exchange are defined in the League ofNations Convention Providing a Uniform Law For Bills of Exchange andPromissory Notes, (Geneva, 1930), and in a subsequent revision calledthe UNCITRAL convention, the UNITED NATIONS CONVENTION ON INTERNATIONALBILLS OF EXCHANGE AND INTERNATIONAL PROMISSORY NOTES, presentlyavailable on the Internet at http://www.his.com/-pildb/bookletb.html.UNCITRAL is expected to supersede the 1930/1931 League of Nationsconvention when signed and accepted by the required governments.

Referring again to FIG. 5, in step 3, after seller S receives prereleasedraft 10 signed by buyer B, the traded product is released to a carrier,or to an import-export agent or the like, for delivery to buyer B. Atthis point, seller S is secure in the knowledge that possession ofaccepted payment draft 10, which can be redeemed after shipment,eliminates any risk of his being put in the position of having releasedthe traded product only to find that, for one reason or another, buyer Bis unwilling, or unable, to pay for it. For example, absent thecommitment made by accepting prerelease draft 10, buyer B might havepurchased equivalent product from another vendor.

In step 4, after shipment, seller S presents prerelease draft 10, alongwith the invoice, and proof of release of the traded product, to asuitable financial institution FI, receiving full value of the purchase,less commissions and discounts. Step 4, considered in isolation, issimilar to the traditional discounting process of bill broking, aprocess formalized in the UK in 1825. For redemption the draft isaccompanied by shipping documents attesting to the date shipment and thevalidity and activity of the draft. In this embodiment financialinstitution FI effectively extends credit to buyer B, interest and feesfor which are discounted off the redemption payment made to seller S.Financial institution F1 will in this case require evidence of buyer B'sability to settle prerelease draft 10 at maturity, before redeeming thedraft. Meanwhile, seller S has been paid in full.

In step 5 of the method shown, at maturity of prerelease draft 10,financial institution FI collects payment from buyer B.

In the embodiment of the invention described with reference to FIGS.7-8, the method includes the features of the prior FIG. 5 embodiment andadds a novel process wherein a trade acceptance TA, for example, thebuyer-accepted prerelease draft 10, is exchanged for a more negotiableinstrument in a draft substitution process. The more negotiableinstrument should enhance the quality of the payment instrument for theseller and is preferably, a banker's acceptance BA, although otherenhanced quality instruments that may be used will be apparent to thoseof ordinary skill in the art. The draft substitution, or conversion,process can be further enhanced by prior arrangement for issuance of apre-approved banker's acceptance, details of which are described morefully hereinbelow.

In the method described with reference to FIGS. 5-6, the tradeacceptance comprised by the buyer-accepted prerelease draft 10 may haveonly limited negotiability, perhaps being redeemable only with afinancial institution that has established a credit line for the buyer,for example with buyer B's bank. In the case of an internationaltransaction, B's bank can be expected to be in a different country fromthe country in which seller S resides. This geographical difference,legal, cultural and other difficulties, may impose severe impediments tonegotiation of accepted prerelease draft 10 by seller S. Rarely, certainblue chip buyers may have a reputation that makes their paper acceptableto a wide range of institutions. In other cases, it would be desirablefor the seller to have a more negotiable instrument. Such a morenegotiable instrument is provided, pursuant to the invention, asillustrated in the embodiment of FIGS. 7-8, by employing a draftsubstitution process, wherein a banker's acceptance “BA”, separatelyissued, pre-approved and, preferably also, pre-accepted, is substitutedfor the underlying trade acceptance represented by the buyer-executedfirst of exchange.

Before describing the trade financing method illustrated in FIGS. 7 and8, the draft substitution process will be discussed further in thecontext of a transaction employing mutually extinguishable first andsecond bills of exchange, the first of exchange being an embodiment of aprerelease draft 10.

The draft substitution process provides seller S an attractivealternative process for redeeming or negotiating the first of exchange.The draft substitution process will often be preferable to discountingthe first of exchange, which may be difficult, or require anunacceptably deep discount to be given, depending upon the reputation ofthe buyer. Pursuant to the draft substitution process of the invention,the seller submits the first of exchange, along with proof of occurrenceof the triggering event, which may for example be a delivery instrument,to the financial institution, or to a third party administrator actingon behalf of the financial institution. The first of exchange can beheld as collateral by the financial institution or the third partyadministrator and, accompanied by the delivery instrument, or otherevent proof, can be used at any time up to the maturity of the bill'stenor (time) to force payment at tenor, according to internationaltreaty and practice. Separate holding of the collateral provided by thefirst of exchange allows the financial institution great leeway in theprocessing of collections and payments.

Further enhancement of the draft substitution process can be effected bysuitable contractual arrangements between the seller and the financialinstitution or its representative which are made before release of thetraded product. A particularly desirable arrangement is to make priorprovision for issuance of a pre-accepted banker's acceptance, wherebythe financial institution agrees ahead of time to issue a banker'sacceptance and substitute it for the buyer-accepted trade acceptance,the first of exchange.

To this end, prior to offering their goods or services to the buyer,seller S enters into an acceptance-issuing agreement with a suitablefinancial institution, the acceptance-issuing party, which is capable ofaccepting bills of exchange or drafts The acceptance-issuing agreementdefines a process which results in the creation of a banker'sacceptance, or a previously accepted banker's acceptance which thefinancial institution is willing to substitute for a trade acceptance.The acceptance-issuing agreement preferably sets forth contractualcriteria to define the trade transaction and to define the parties tothe trade transaction, i.e. the seller and the buyer. Preferably also,unique identifying numbers are recited in the acceptance-issuingagreement for the parties to the transaction and for one or moretransactions they plan to consummate. These identifiers can subsequentlybe used on the face of the transaction documents themselves to definethe particular transaction, and transaction parties to which thedocuments relate.

To induce the acceptance-issuing financial institution to substitute itscredit for that of the buyer, one of many forms of credit enhancementprocess may be employed, including but not limited to credit insurance,avals, guarantees, cash or other collateral, letters of credit, and soon.

In one example of such an acceptance-issuing agreement, seller Sauthorizes, by limited power of attorney, the acceptance-issuing partyto create a bill of exchange on behalf of seller S, the drawer, on theacceptance-issuing party, the drawee, for the dollar value of the draftsubstitution process, less fees as agreed. The acceptance-issuing partyagrees to issue and accept the bill of exchange drawn on itself, forexample a first of exchange in the process of the invention, or a solebill of exchange, at a future date certain. The future date certain maybe a specific term, e.g. 10, 30 or even 90 days, from a future eventdate, relevant to the trade transaction financed by the pre-approvedbanker's acceptance, for example a shipment date. This agreement createsthe desired pre-approved banker's acceptance which is backed by theissuing financial institution's credit and reputation and, dependingupon the institution, may have world-wide acceptance. The pre-approvedbanker's acceptance provides valuable collateralization of thetransaction for seller S, since banker's acceptances have wideacceptance, and are discountable at low rates. Seller S also benefitsfrom a process that is event driven and which for an exporter-seller,can convert foreign risk on an unknown foreign company, to domestic riskon a known and generally acceptable financial institution. This featureis of particular value to sellers in the major industrial-financialcountries, for example, the United States, Europe, Japan, Canada,Australia and the like. Other forms of acceptance-issuing agreement, orof equivalent credit-enhancing agreements, will be apparent to thoseskilled in the art from the teachings herein.

To avoid disputes between buyer B and seller S, or to facilitate theirresolution, one or more suitable treaties or conventions may bespecifically invoked by reference in the transaction documents, or maybe inherently applicable to the transaction as a result of internationalagreement, or prevailing national law. In particular, as stated above,the League of Nations 1930/1931 convention (or a successor convention)is useful for defining bills of exchange and for providing parametersfor settlement of recourse issues.

Some examples of other useful agreements and laws are: ICC INCOTERMS1990(ICC Publishing S. A., Paris, France) which provides a set ofinternational rules for the interpretation of common foreign tradeterms; International Chamber of Commerce Universal Commercial Practices500 governing the processing of documentary credits (including lettersof credit); the UNCITRAL Model Law on Bills of Exchange, if and whenadopted; and the Vienna Convention on International Sale of Goods, towhich the United States acceded in 1998. Preferably, the buyer andseller contractually acknowledge suitable treaty law, which may be soinvoked whether or not the relevant jurisdictions have acceded to thetreaty.

A desired convention may be easily invoked by referencing it in adocument signed by both buyer B and seller S, the buyer's signaturebeing the more important. Pursuant to the present invention such adocument is a pro-form a invoice specifying the transaction details anddescribing the traded product. Conveniently the pro-form a invoice canaccompany the first of exchange which may reference the pro-form ainvoice. The pro-form a invoice should also be executed on or behalf ofthe buyer, to indicate acceptance of its terms by buyer B, and should bereturned to seller S, prior to release of the traded product.

The pro-form a invoice is in the nature of an offer extended by seller Sto do business with buyer B on the terms set forth in the pro-form ainvoice. Buyer B's signature indicates acceptance of that offer on thoseterms. It would be desirable to permit certain limited changes to bemade to the transaction particulars after buyer acceptance of thepro-form a invoice and before the transaction is completed. For example,either buyer B or seller S may wish to make minor adjustments in theproduct to be supplied. Accordingly, the pro-form a invoice preferablyincludes a variances agreement, or provision defining specific changesor classes of change to the transaction particulars, which may beimplemented after buyer B has returned and executed the first ofexchange to the seller, and before the traded product is released by theseller or their agent, to the buyer, or before the transaction isotherwise completed. Such a variances agreement can permit specifiedchanges to be effected by issuing an amended first of exchange which,when accepted and returned to the seller by the buyer, evidences amutual understanding between the buyer and the seller as to the changesthey contemplate. Based upon the credibility and collateral provided bythe seller's possession of an executed first of exchange, executionrequirements for the amended first of exchange may be less onerous thanfor the original document. For example a faxed or electronicallygenerated document may be accepted.

Use of a second bill of exchange as a collection instrument enables thefirst of exchange and the collateral it represents to be physicallyretained in a location within a legal jurisdiction acceptable to thefinancial institution, while the second of exchange is used elsewherefor collection from the buyer or their agent. Such location may beremote from the buyer or the buyer's bank, and may even be in anothercountry. Preferably, the first and second bills of exchange employed inthe trade finance process of the invention have substantially identicalcharacteristics, save for different document identifiers, differentdescriptors, i.e. “first of exchange” and “second of exchange”,respectively, and, usually although not necessarily, sequential creationdates. The instruments are mutually extinguishable, whichextinguishability is suitably indicated on the face of each document byrespective phrases such as “First of Exchange (Second Unpaid)” and“Second of Exchange (First Unpaid)”. In a preferred embodiment, theinvention provides an electronic document generation process which hascontrols to ensure that the amount, parties, tenor, and due dates of thefirst and second bills of exchange are identical, so that payment of thefirst extinguishes the second, and payment of the second extinguishesthe first.

At the time of making this patent application, it is preferred that theoriginal first of exchange be a paper (or equivalent) document bearingthe original or actual signature of the buyer and preferably also of theseller. Such an originally signed paper first of exchange is desirableto fulfil the requirements of the League of Nations 1930-31 convention.However, as explained elsewhere herein, adoption of subsequentinternational agreements, such as the UNCITRAL convention may enablethese requirements to be met electronically in the future. Features suchas electronic authentication, optionally verified by a digitalcertificate, effected by personal data identifying the buyer, such asthumb print or iris image data, or other electronically signature, mayfacilitate the use of electronic rather than paper documents, and theinvention includes such variations.

While the original first of exchange should, at present, be a paperdocument, if desired, any amended first of exchange can be a faxed orelectronic mail or other sufficiently credible electronicallytransmitted document. In particular, it is contemplated that faxedamended documents purporting to be signed by the buyer can constitute asubstitute undertaking under the same terms and conditions as theunamended originals. Also, such a variance agreement can provide that,for agreed specified changes, the buyer will not raise legal, signature,or authentication defense against the presentment of faxed and possibly,documents transmitted by e-mail or other electronic means.

It will be understood that the invention is not limited as to the mediumin which the trade transaction documents are expressed. Current practicein international trade is still to rely upon paper documents and to usepaper as the medium of transport of executed documents, as they arepassed from one party to another, notwithstanding that the documents mayhave been created, reproduced or transmitted electronically. However,the rapid emergence of electronic commerce in recent years suggests thatelectronic documents will soon be accepted pari passu with paperdocuments. In the interim, paper documents and electronic documents canbe expected to exist side by side for some time as different legaljurisdictions introduce changes.

Referring now to FIGS. 7 and 8, the method of trade financingillustrated comprises a number of transactional steps conducted betweenseller S, buyer B and a financial institution or its serviceintermediary, referenced FI/SI in the drawings and hereinafter. Inpracticing the invention, the steps of the method should usually becarried out in the sequence shown, although variations to the sequencewill be apparent to those skilled in the art having the benefit of theteaching herein. Other parties to the process may include a holder H ofa banker's acceptance an issuing bank IB, and a third partyadministrator TPA of the trade financing process. In a particularlypreferred embodiment, third party administrator TPA employs a documentimage work flow system (not shown in FIGS. 7-8) to facilitate andoversee the implementation of the method shown.

Preferably, although not necessarily, the method commences with apreliminary step, as shown in FIG. 7, in which financial institutionFI/SI pre-approves, for seller S substitution of a banker's acceptancefor a first of exchange accepted by buyer B.

In step 1 seller S sends buyer B a pro-form a invoice accompanied by afirst bill of exchange, “first of exchange” herein. The pro-form ainvoice itemizes or summarizes the goods or services to be supplied andthe amount to be paid as agreed in the preliminary negotiationspreceding the transaction steps illustrated. Preferably, the pro-form ainvoice includes, as described above, a contractual condition removingmerchandise claims or disputes from the payment cycle for resolution inaccordance with international convention or treaty.

The pro-form a invoice preferably comprises customary invoice dataidentifying the buyer and seller and listing the total amount of thetransaction, the method of shipment and optionally also providing aline-by-line itemization of the goods to be shipped. Additional optionaldata may relate to terms of payment and may include identifiers of, orreferences to, any of the instruments or payment methods of theinvention described herein. Date information is preferably alsoprovided, including an issuance date for the pro-form a invoice, adeadline for completion and execution of the accompanying first ofexchange, and possibly also a shipment date or deadline for shipment ofthe relevant goods by the seller.

The sales agreement embodied in or accompanying the pro-forma invoicecan also include choice of law clauses specifying laws applicable to theoffer and acceptance cycle and to the underlying trade transaction. Forexample, reference can be made to laws of the state of a national orsupranational territory such as the United States of America or theEuropean Union. Preferably, for international trade transactions, aninternational treaty is specified, for example, the Vienna Convention onthe International Sale of Goods, which the United States and mostindustrial countries have ratified. Where one party is domiciled in acountry not a party to the treaty, treaty law can nevertheless beinvoked by contract to provide a uniform legal basis for multipletransactions, and to reference a body of transaction law which can beacceded to, and from which derogations or variations can be made byagreement.

The pro-forma invoice provides a convenient vehicle for embodying notonly the transaction particulars but also the above-describedtransaction-specific agreements, because the triggering event willusually be controlled by the seller. Therefore the seller will createthe document that accompanies the goods, namely the invoice. In thiscase the pro-forma invoice is a system precursor of an actual invoice.The latter can be quickly and accurately generated from the former.

However, other documents could be used to embody the sales or purchaseagreement terms preferred by the invention, as described herein, forexample a purchase order. Such purchase order should also be signed bythe buyer in order to have the same force and effect as the signedpro-forma invoice described more fully herein.

As referenced hereinabove, once step 1 has been completed with executionof paper documents, by agreement which may be incorporated in thedocuments employed in step 1, subsequent documents correcting changing,amending or expanding the transaction can be exchanged by electronicmeans such as fax, email, or data transfer so long as they appear on theface to be authentic, or bear or are accompanied by electronicauthentication, such as described above, and come from a source andthrough a process generally recognized by both parties in the normalcourse of business.

The first of exchange is preferably also drawn in compliance with the1930 League of Nations convention, or successor conventions, and is madeout in the amount of the pro-form a invoice. The pro-form a invoice islinked to the first of exchange, initiating the draft substitutionprocess, for example by explicit reference to the first of exchange, orby identification of the pro-form a invoice on the first of exchange.The first of exchange is completed and executed by the buyer, forpresentation to the buyer for payment at a later date, for example, adate certain specified as a fixed term after shipment, delivery or otheragreed event.

By signing the pro-form a invoice, and accepting the first of exchange,both of which are authorized, issued by or on behalf of and preferablyexecuted by seller S, buyer B establishes the basic terms and conditionsagreed between buyer B and seller S. In international trades this offerand acceptance cycle between buyer B and seller S, will usually begoverned by the Vienna Convention on Contracts for the InternationalSale of Goods (available from www.cisg.law.pace.edu/www). Buyer B'ssignatures on both the pro-form a invoice and the first of exchangeestablishes an amount, and a date certain for payment, at a specifiedinterval after shipment or provision of the goods or services (or both).The signed documents are returned to seller S, step 2. Optionally,seller S may forward the signed pro-form a invoice and first of exchangeto a third party administrator TPA who holds the first of exchange ascollateral for the transaction.

It is also contemplated that the first of exchange can be created ortransmitted, or both, by a suitable agent of the seller, for example, atrusted third party such as a transportation company or electronicnetwork which enjoys the confidence and trust of the seller. Such anagency provision can allow goods to be released, delivered or shipped,to the buyer, promptly after receipt by the agent of the buyer-acceptedfirst of exchange, permitting the first of exchange to be attached togoods being released, shipped or delivered or otherwise made immediatelyprecedent to services being provided.

The invention envisages that a third party administrator TPA canadministrate and co-ordinate individual or multiple transactions for aseller S or for multiple sellers S or buyers B, adding enhancements andefficiencies as a database history of credit and other relevantfinancial and trading information is developed.

In step 3 seller S notifies the institution capable of issuing abanker's acceptance, or a service intermediary acting on its behalf,designated FI/SI in the drawing that buyer B and seller S are about toenter into a transaction, at the conclusion of which, seller S willoffer to exchange a trade acceptance TA for a pre-approved banker'sacceptance.

In step 4, the acceptance-issuing institution, or its serviceintermediary, FI/SI, approves buyer B and the transaction. If the FI/SIdoes not pre-approve the transaction or buyer B, the transaction isaborted.

With the approval of the acceptance-issuing institution in hand, in step5, seller S ships the goods to buyer B or supplies services to buyer B(or both), or otherwise releases the traded product, creating thetriggering event which initiates the term of the first of exchange.

The triggering event of release, shipment or delivery of goods can bedescribed by standard trade terms. These terms and others are defined inICC INCO TERMS 1990, ICC Publishing S.A. International Chamber ofCommerce (Paris, France) and successor documents, and include, but arenot limited to, terms such as “EXW” ex-works, “FCA” free carrier at andso on.

In step 6, which should usually take place substantiallycontemporaneously with the release of goods or delivery of services instep 5, or within a couple of days thereof, seller S prepares and sendsthe invoice along with a second bill of exchange (“second of exchange”herein) to buyer B's bank.

The second of exchange preferably includes unique transactionidentifiers and contains instructions to buyer B to pay on a datecertain a sum of money to the account of the acceptance-issuinginstitution, under the same terms and conditions as the first ofexchange.

The invoice is linked to the second bill of exchange, completing theprocess that allows for substitution of a banker's acceptance for atrade acceptance. B's bank holds both documents until buyer B signs andaccepts the second of exchange, step 7, whereupon buyer B obtains theinvoice to the goods or services, step 8. The date on which seller Sreleased the goods or such other triggering event date as may have beenagreed, will usually be made apparent from the invoice, and is used toestablish a date certain for payment of the second of exchange, whichdate is entered on the second of exchange, prior to signing. The datecertain is calculated by adding the term stated on the second ofexchange to the date of the event described on the second of exchange.The date of the event can, for example, be the date of a transfer event,for example the date of transfer, or release, of the goods from theseller to a shipper. Such a transfer date can be determined from thetransport document provided by the carrier, which document records theevent of shipment, or receipt of the goods for shipment. The transferevent may be as specified with INCOTERMS 1990. Since both the first andsecond of exchange have the same term which runs from the same eventdate, they also mature on the same date.

In step 9, B's bank holds the buyer-signed second of exchange tomaturity when the bank debits B's account and remits cash to theappropriate party such as financial institution FI/SI, see step 13hereinbelow.

In step 10, seller S furnishes to the FI/SI the buyer-accepted first ofexchange received in step 2, along with evidence verifiable by theFI/SI, for example a paper or electronic document, of shipment accordingto the accepted pro-form a invoice.

The nature of the evidence of shipment of goods, delivery of services,or other event will depend upon upon the carrier or service provider andprevailing law or regulations, as will be apparent to those of ordinaryskill in the art from time to time. Whereas certain paper documents suchas waybills and bills of lading have traditionally been relied upon forverification of shipment, it may be expected that suitably authenticatedelectronic versions of these and other documents will become widely usedand acceptable in the future for the purposes of the invention. Carriersor providers having electronic tracking and query capabilities arepreferred to facilitate obtaining of the requisite event evidence, andto facilitate management of the process.

After such verification, the FI/SI issues, or causes to be issued andaccepted, a bill of exchange drawn on the FI, the banker's acceptance.The banker's acceptance will have a maturity related to the maturity ofthe first and second of exchange, for example, 0, 7 or 14 days, up toabout 30 days, or in unusual cases even 60 days, after the maturity dateof the first and second of exchange.

In step 11, if a pre-transactional agreement has been made betweenseller S and the FI, as described above, and seller S has provided thenecessary documents, for pre-acceptance, the FI will issue apre-approved banker's acceptance quickly and routinely.

In step 12, the banker's acceptance, executed by financial institutionFI/SI, is delivered to seller S. In step 13, which is optional, seller Scan negotiate the pre-approved banker's acceptance for a cash instrumentwith one of many commercial banks or financial institutions whorecognize the issuer's paper. The cashing institution becomes the holderH in due course of the banker's acceptance. If preferred, seller S canhold the pre-approved banker's acceptance until maturity and cash itwith the issuing financial institution FI/SI.

The banker's acceptance is separately issued by the FI to seller Swithout recourse to seller S, less agreed fees, if any. In the eventthat buyer B does not pay the first of exchange or the second ofexchange, the FI has no recourse to seller S in that regard. A banker'sacceptance is an unconditional promise to pay at a future date. The FIholds the first of exchange as collateral for issuance of the BA. Uponcollection of the first of exchange (second unpaid) or the second ofexchange (first unpaid), the FI substitutes cash collateral less feesfor the bill of exchange collateral underlying the issuance of the(pre-accepted) BA.

In step 14, upon the date certain, the buyer B's bank re-presents thesecond of exchange (first unpaid) to buyer B in the normal course ofbanking events and receives payment. By agreement between the buyer andthe seller, or by treaty or banking practice, collection of the secondof exchange may employ an electronic version of the draft rather thanrequiring a hard copy, or paper, document.

In the event of non-acceptance of the second of exchange, holder H ofthe first of exchange completes the documentation of the first ofexchange by attaching the invoice and the shipping documents to thefirst of exchange, (second unpaid) and submits the previously acceptedfirst of exchange to the buyer's bank for payment (second unpaid).

In step 15, upon presentation of the BA at its due date, the BA-issuinginstitution pays out cash to holder H, who may be the first or asubsequent holder in due course.

FIG. 9 shows more clearly the life cycle of the first of exchange. It iscreated by seller S, and sent to buyer B for execution. Buyer B signsthe first of exchange, indicating acceptance of the payment draft itembodies, and returns it to seller S. These steps are completed beforeseller S ships or releases the traded product. After releasing thetraded product, seller S sends the buyer-accepted first of exchange tofinancial institution FI/SI requesting issuance of a banker'sacceptance, which may have been pre-approved. When the first of exchangematures, financial institution FI/SI may or may not forward it to buyerB's bank for collection, along with proof of occurrence of thetriggering event, e.g. shipment, or release for shipment. Payment of thefirst of exchange extinguishes the second of exchange.

FIG. 10 shows more clearly the life cycle of the second of exchange. Itis created by seller S at the time of shipment with a date certainentered for its term, after the date of release of the traded product isknown. The second of exchange is then sent to buyer's bank B along withthe invoice. Buyer's bank B then attempts to obtain the buyer'sacceptance of the second exchange against release to the buyer of theinvoice which the buyer will need to clear the traded product fromcustoms or to receive it from a carrier. This document-against-releaseprocess is described more fully hereinbelow. Bank B holds thebuyer-accepted second of exchange until maturity, when buyer B's accountis debited, thereby extinguishing the second of exchange. Because theyare mutually extinguishable, the first is thereby automaticallyextinguished.

In the above-described process, the first bill of exchange becomes thecollateral for the banker's acceptance, while the second bill ofexchange is used in a more conventional way to effect collection ofpayment for the purchase from buyer B. Because the first and secondbills of exchange are mutually extinguishable, payment of the secondextinguishes the first, and vice versa.

Preferably, the first or second of exchange, or both, are embodied in adocument which also contains, on its face, a transaction window 30, FIG.6, reserved for information that includes unique transaction identifierswhich enable the FI/SI to identify a transaction specifically. Thetransaction window, and the identifier information it contains, arepreferably combined with the relevant bill of exchange instrument into asingle paper or other hard copy document, in a manner which does notimpair the character of the bill of exchange, preferably by occupyingdistinct and separate areas on the face of the document. It is preferredthat the instrument of the bill of exchange be compliant withinternational treaty with regard to both form and content, onerequirement of which is that the bill of exchange is a financialinstrument ordering payment without reference to the underlying tradetransaction. To this end, the transaction window can be visually oractually outside of the instrument of the bill of exchange or in anelectronic sense, virtually outside the instrument of the bill ofexchange. Thus, the first or second of exchange, or both, can beidentified as transaction-specific without impairing their legalsignificance.

Holding the first of exchange as collateral for future payment, subjectonly to payment upon the due date of the tenor specified, the seller canbe indifferent to the intermediate mechanisms of payment, since inpractice the buyer pays once (drafts are mutually extinguishable) andseller is satisfied with payment in whatever form.

A further object of the invention is to provide trade financing methodsand instruments which are amenable to electronic commerce. A difficultyin this respect is that traditional discounting mechanisms useendorsements in blank on the back of a bill of exchange to enablerecognition of a holder in due course. Such endorsements are inherentlytechnically difficult to capture electronically from a two-sided paperor other document, in a legally acceptable manner, because of thedifficulty of proving the relationship between the front and the back ofthe document.

While other solutions may be known or may become known, and can beemployed in the general method of the invention, a further, moreparticular aspect of the invention solves the problem of endorsementcapture by providing a novel paper financial instrument suitable forelectronic capture which instrument has a face which comprises adocumentary area containing essential information that characterizes theinstrument and a transaction window for transactional and historicalinformation, the documenting and transaction areas being distinct onefrom the other. Payment draft 10, as shown in FIG. 6 and the bills ofexchange shown in FIGS. 11A-11B (to be described hereinbelow) comprisethree embodiments of such a financial instrument. Others will beapparent to those skilled in the art.

The information in the documentary area can comprise conventionalfinancial information such as the text describing the instrument, thenames of the parties to the instrument, an amount and terms of payment,but preferably the information is such as to characterize the instrumentas a bill of exchange, and more preferably, as a first or second ofexchange as described herein. By accommodating all necessary informationon one face, and leaving the other face blank, such a paper instrument,is amenable to single-side scanning to provide electronically capturedproof of collateral.

The transaction window can serve one or a number of purposes. Forexample, the transaction window can accommodate a unique transactionidentifier, or more preferably, a compilation of unique alphanumericidentifiers that describe a transaction pertinent to the instrument, andpreferably also, document the flow of the transaction. The flow of thetransaction can be indicated by successive entries in the transactionwindow, listing for example identifiers for the seller and buyer, forthe transaction for each document in the transaction, for shipping orother release events, for payment events, draft substitution events andso on.

Optionally, the transaction window can provide space and textualdirectives for one or more endorsements, by one or more successiveholders in due course. Alternatively, a separate endorsement window canbe provided, also on the face of the document and also in an areadistinct from the instrument area, for such one or more endorsements.

By positioning all of the relevant tracking information on one face withthe documentary information, in a transaction window, geometrically andvisually outside of the instrument area, without intruding into thedocumentary area which defines or characterizes the financialinstrument, the invention enables an image capture system to record allrelevant information in a secure and technologically efficient manner.The resultant electronic instrument may be, or may become acceptable asproof or verification of the history and holders of the instrument.While the paper document should preferably maintain a clear, preferablygeometrical, demarkation between the instrument and transaction areas,in the electronic realm the distinction may be real or virtual, and maybe achieved in a number of ways, as will be known to those skilled inthe art.

By this process the invention accommodates paper documentation which ispresently required by treaty for trade between two different legaljurisdictions, while providing for efficient electronic tracking,recordal and archiving, and accommodating the probable eventuality thatelectronic documentation will become an acceptable practice, by law orprivate contract, for trade within a single legal jurisdiction, or fortrade between different jurisdictions, especially between national orsupranational, jurisdictions. To this end, the novel first of exchange,as described herein, preferably comprises sufficient data, in anappropriate formal arrangement, to comply with relevant national andinternational law, more preferably with relevant international treatiesand practices.

When and if the UNCITRAL convention becomes operative, electronicevidence of release, shipment or delivery documents will becomeacceptable enabling the invention to be practiced largely electronicallyreducing or eliminating the need for paper documentation.

If desired the buyer and seller, can agree by private contract to allowelectronic payment or drafting of the amount due, using an electronicdata interchange format such as ANSI .X12 format commonly employed inthe US, or an international standard EDIFACT message syntax or othersuch standard e.g. SWIFT, as may be convenient or appropriate.

The sample bill of exchange forms shown in FIGS. 11A and 11B embody theparticulars described above including, on its lefthand side areas forentry of transaction identifiers and buyer information, which areas aredistinct from the bill of exchange itself. In this case the buyer is animporter, and the seller is an exporter.

The term of the first of exchange shown in FIG. 11A is described as “60DAYS AFTER EVENT (DATE)” with the intent that the name of the event, forexample, release of goods, will be entered on the document, and theparenthetical item, which if a date, is the date generated when thespecified event occurs.

The term of the second of exchange shown in FIG. 11B is described as “60DAYS AFTER DATE (OF EVENT)”. By the time the second of exchange isissued the event date will be known and can be inserted as the issuancedate. The first and second of exchange have corresponding tenors fromthe same event, and therefore obtain the same maturities. Aside fromthis difference, and their dates of issue in the top right-hand corner,the two bills are identical.

The parentheses in the two bills of exchange bracket variable data thatmay be computer managed, for example from the document image workflowsystem, if employed. These variable elements functionally relate thedocuments to the computerized workflow system.

The pro-forma invoice shown in FIG. 11C comprises a cover sheet dividedinto an upper information section and a lower, agreement section. Aslabeled in FIG. 11C, the upper section sets forth basic information onthe exporter issuing the pro-forma invoice, on the importer, on a bankof presentation, referenced as the importer's or buyer's bank herein,summary information regarding the pro forma invoice, the terms of sale,a ship-to location, carriage insurance information, informationregarding import certification and import documents required, as well asan itemization of the pro forma invoice. The itemization can contain oneor more traditional invoice lines setting forth quantity, description,price and extension of goods shipped, where the shipment comprises asmall number of items, or it may reference an attached conventional proforma invoice for more complex shipments.

The lower, agreement section of the cover sheet provides agreementparagraphs regarding merchandise claims, transportation, a limited powerof attorney, change orders and a first blue exchange. Preferably, theimporter-buyer is required to sign, date and accept each of theparagraphs individually, prior to the triggering event set forth in thefirst bill of exchange. In most cases, in practicing the invention,acceptance of the paragraphs regarding removal of merchandise claimsfrom the payment cycle and payment of a first bill of exchange will berequired, while the other agreement paragraphs are optional, butpreferable. If desired or required, the seller, or the seller's agent,can also sign or otherwise indicate its assent to and authorization ofthe pro-forma invoice. It will also be understood, that where thefinancing process is buyer-initiated or controlled, the materialelements and information in the pro-forma invoice can be incorporated ina purchase order or purchase order cover sheet with suitable changes.

The following tables provide non-limiting examples of information andagreement paragraphs that may be employed in the pro forma invoice whenpracticing the invention. The table headings reference the legends usedin FIG. 11C to indicate locations where the table data may appear on thepro-forma cover sheet. It will be appreciated that the arrangement ofdata or data sections on the pro-forma invoice can be widely varied.Those of ordinary skill of the art will understand the abbreviationsused and variations that may be made within the spirit of the event. Itwill also be understood that much of the variable data can becomputer-generated from available databases or from other programprocedures, for example, importer or exporter setup routines where therequired information has previously been gathered or maintained. Curlyparentheses, { }, indicate possible sources for required data items.

TABLE 1 Exporter Information Exporter's DUNS #:  {D&B lookup}   Exporternamed Party {N.P. or contact} Company {from exporter set-up}   Address 1{from exporter set-up} Address 2 {from exporter set-up   City       “State/Province “   Postal Code    “ Country: “   ISO Country code: “  Tel:         “ Fax:       “       Email:   ‘    www.      “

Of note in Table 1 is that the exporter information can be obtained froman exporter setup routine and includes a DUNS number.

TABLE 2 Terms of Sale 1. Payment: League of Nations Convention on Billsof Exchange 1930/31 2. Shipping terms: EXW loaded, INCO 1990 3.Governing Law: UN Vienna Convention on the International Sale of   Goods (1980) 4. Merchandise Claims: not later than {cover ltr tenor}days after    shipment. 5. Shipped under “Retention of Title” 6. Latestshipping date: / / 7. IF Credit APPROVED: Documents against acceptance:Tenor:  days

The terms of sale set forth in Table 2 include reference tointernational conventions for payment terms, shipping terms andgoverning law, as described elsewhere herein. Item 4 provides for adeadline for merchandise claims to be automatically posted from a coverletter, while items 6. and 7. provide deadlines for the seller to shipand prepare documents.

TABLE 3 Importer Information Duns # {from importer set-up} Attn:  {npfrom importer set-up} Importer: {from importer set-up address “ address:city, unit, postal code  “ tel: “            fax: ” Email:  “

Similarly to the exporter information, the importer information in Table3 can be retrieved from an importer setup routine and includes anidentifier such as a DUNS number.

TABLE 4 Ship to: Ship to: {from importer set-up}   Attn:  {customerfills in} Warehouse: same Address same   city, unit, postal code: sametel: “           fax:”   Email:  “

The ship-to address in Table 4 can also be obtained from an importersetup routine, if desired.

TABLE 5 Pro-Forma Invoice Summary Information PROFORMA invoice #: {fillsin from doc} Customer id: {on proforma (from accounts)} DATE: {enteredfrom proforma} Amount: {entered from proforma} Ship by date: {enteredfrom proforma}

The pro-forma invoice summary information in Table 5 is obtained fromthe proforma invoice itself, which is either attached or embodied in thecover sheet, and may be automatically retrieved from a databasegenerated in creating the proforma invoice.

TABLE 6 Bank of Presentation BANK OF PRESENTATION {importer fills}Branch: Contact: Address 1 Address2 city,      unit,     postal codetel:       fax:     email:

TABLE 7 Carriage Insurer Information Insurance Company: {importer fills}    Policy #                       Marine all risks: shippers load &count. Insurance at the cost and risk of buyer. Enter here the customs(HS) code most applicable to these goods:             

TABLE 8 Import Certifications Import Certifications RequiredORIGIN(form)                                          Other                                    

TABLE 9 Import Documents Required Import documents required for customsclearance Type: _ InvoicePacking Lists Other documents CERTIFICATE OF       Originals: no. Copies: no.

The details required for the bank of presentation in Table 6, usuallychosen by the importer, “buyer's bank B” as appropriate herein, forcarriage insurer information in Table 7, for import certifications inTable 8 and for the import documents required in Table 9, are leftblank, to be filled in by the importer.

TABLE 10 Pro-Forma Invoice Itemization Harmonized System Code: Corrector amend HS numbers to reflect your classification. Proforma InvoiceTotal from detailed domestic itemized Invoice attached, or single itemlisted below with Harmonized System numbers (8 digits-required).HS#    [enter]          description/part #    units unit value extensionHS#    {enter]          part #    units     unit value  extension Itemor Total value   $    Accepted{          Date” {exporter duns fromprevious page} {time date computer clock} {importer duns from previouspage} {proforma invoice # from previous page} {total proforma invoiceamount from.previous page} {ship by date from previous page}

The pro forma invoice itemization section in table 10 provides for thedetails to be obtained from an attached invoice. Alternatively, detailsof a single line item invoice can be entered in the section comprised byTable 10. Provision is also made for the entry of Harmonized Systemnumbers and for additional invoice and identification data to be postedautomatically, as indicated by the data in curly parenthesis.

TABLE 11 Agreement Section Paragraphs Merchandise Claims: In acceptingthis pro-forma invoice, the importer specifically agrees to recognizethe Bill of Exchange as a payment instrument under which payment is madeas a financial instrument subject to the League of Nations Convention of1930 (or successor treaties) which specifically excludes merchandiseclaims as a reason for non-payment, or a reduction in payment, of theamount of the Bill of Exchange. The exporter and the importer mutuallyagree to accept the terms of sale as stated, and to identify and settlemerchandise disputes as a transaction separate and apart from thepayment transaction, in accordance with the UN CISG. Accepted:    DATETransportation: As the owner of the goods, ex-works loaded, the importerwill specify with the power of attorney below(or leave blank), a door todoor, multimodal transportation company, with its own offices in boththe country of exportation and country of importation, shipping thegoods at the account and risk of the importer, such that thetransportation of goods is covered by one waybill only on a door to doorbasis, and with a transportation company that has electronic trackingcapability such that the carriage and the delivery of the goods can bemonitored and established (including proof of delivery) by electronicmeans. In the event that the importer does not wish to select such acarrier, a blank limited power of attorney will enable the exporter, orTFSC on behalf of the importer, to use their best efforts withoutobligation to select a carrier that meets the above criteria who iswilling to undertake carriage of the goods at the expense of theimporter. Accepted:    DATE Limited POWER OF ATTORNEY (required in orderfor documentation to be completed in the US on your behalf) Youauthorize(agent/forwarder/carrier or leave blank)                         to actas forwarding agent for you for Export Control, Census Reporting, andCustoms purposes. If you have no permanent residence in the UnitedStates, you also authorizeTrade Finance Service Corp./forwarder/carrier)          to acceptservice of process issued by the Department of Commerce, Department ofTreasury, or any other Federal Government Agency or Court addressed toyou and you consent to personal jurisdiction and venue of any FederalCourt or administrative tribunal in the United States. You herebycertify that all statements and information contained in thedocumentation relating to exportation are true and correct. Furthermore,you understand that civil and criminal penalties, including forfeitureand sale, may be imposed for making false or fraudulent statements orfor the violation of any United States laws on exportation, includingbut not limited to 13 U.S.C Section 305, 22 U.S.C. Section 401, 16U.S.C. Section 1001, and 50 U.S.C. App. Section 2410. So agreed byagreement and acceptance signed below. Iinitial here        date        . Change Orders: Changes to this transaction can be made upto the time of shipment by the exporter issuing and the importeraccepting a new pre-export proforma invoice with a covering PEPI andfirst Bill of Exchange attached as herein specifying the terms of thenew transaction. By mutual agreement, these documents may be exchangedby fax between fax machines regularly used in the normal course ofbusiness and listed herein. Also by mutual and explicit agreement faxeddocuments which appear on their face to have been signed by either partyshall be considered for the purpose of this and the changed transactionas manual signatures so that any and all rights and obligations accruingto this document covering a particular transaction shall in the same wayaccrue to a subsequent transaction modify this transaction. The importeridentified above, and signing this document explicitly agrees not tochallenge a faxed signature on a bill of exchange which on its faceappears to have been signed to modify the initial transaction. Accepted:   date: First Bill of Exchange: The First Bill of Exchange shown below,represents a commitment to pay the First of Exchange (second unpaid)when accompanied by shipping documents and/or to accept the Second Billof Exchange which will be issued with the invoice on shipment date. Uponacceptance of the second of exchange, the import documents will bereleased. Upon the payment of the Second Bill of Exchange, the FirstBill of Exchange is extinguished. Upon non-acceptance of the First Billof Exchange the transaction will not be entered into. For non-acceptanceof the Second Bill of Exchange, an instruction for protest has beenissued, and the shipping documents with the First Bill of Exchange(accepted) will be presented for payment. Non-payment will be protested.You must sign and date the proforma invoice attached and the spacemarked “ACCEPTED” on the document below to initiate this transaction.You may fax this document and the signed proforma as an advice ofacceptance, however, the transaction cannot be officially entered untilthe signed document is received in the mail.

As may be understood from the description hereinabove, the inventionprovides, in a further aspect, a trade financing method wherein:

-   -   a) an originator creates a primary bill of exchange, chargeable        to the account of a counterparty and activatable by a singular        event occurring after creation of the primary bill of exchange;        and    -   b) a further party subsequently issues, in exchange for the        first bill of exchange, a substitute bill of exchange chargeable        to the account of the further party.

Typically, the originator and the counterparty have planned orcontemplated for the event to take place after creation of the primarybill of exchange, preferably, after execution of the primary bill ofexchange by the counterparty. The event can, for example, be acommercial event such as a purchase of a product from the originator bythe counterparty.

In a particularly preferred and advantageous embodiment of this aspectof the invention, the originator and the further party arrangepre-acceptance of the exchange of the substitute for the first bill ofexchange to facilitate the exchange process.

Preferably, but not necessarily, the further party is of substantialfinancial repute so that the method provides credit enhancement wherebythe substitute bill of exchange is more readily negotiable than theprimary bill of exchange. The first bill of exchange can be a tradedraft issued by a buyer and activatable by release from a seller of atraded product purchased by the buyer by delivery of the product oractivatable by such other event relating to the purchase as may beagreed by the buyer and seller. The second bill of exchange can be abanker's draft which is exchanged by the seller for the trade draft.

The process can be managed by software implemented on a suitable device,for example a computer, and the software management process may itselfprovide credit enhancement.

The invention in this aspect distinguishes from a conventional bill ofexchange, in that the primary bill of exchange is created prior to theevent which provides the consideration for the primary bill of exchangeand in that the term of the bill of exchange is linked to the event.Thus the primary bill of exchange is effectively dormant, or inactiveuntil the event occurs.

Sending the bill of exchange from the originator to the counterpartyamounts to a demand for payment which calls upon the counterparty to payupon receipt, or to accept the demand for payment. Preferably, thecounterparty pays (in the former case) or in the latter accepts thedemand for payment by signing the bill of exchange “accepted” andreturns same to the originator, or the originator's agent as evidence ofacceptance. If desired, the counterparty may be authorized to create thebill of exchange on behalf of the originator through the agency of alimited power of attorney.

If desired, the third party administrator TPA can manage the process bywhich the payment between the parties to the first and second ofexchange is applied to the payment process between the parties to thepre-accepted banker's acceptance. The details of such payment processcan be noted on the bills of exchange in the information areas outsidethe bill of exchange area of the document.

The invention can be employed to finance a series of transactionscreating a series of bilateral situations using pre-approved bills ofexchange which demonstrate a willingness to pay, and then creditenhancing, using either the third party administrator TPA, or an outsideagency, to demonstrate ability to pay. The steps of demonstratingwillingness to pay followed by ability to pay are preferably effected ona transaction-by-transaction basis.

The invention extends to the novel instruments disclosed herein,including a pro-form a invoice endorsed or otherwise modified as hereindescribed, the first and second of exchange, both severally and jointlyand the pre-approved banker's acceptance. The invention further includescomputerized, or other electronic or automated systems and software forimplementing one or more steps of the described methods.

It will be understood that traded product traded with the assistance ofthe methods, instruments and systems of the invention can besubstantially any suitably valuable good or service. However, theinvention is contemplated as being particularly useful for tradingmanufactured products, for example, without limitation, machinery,hardware, foodstuffs, books, recordings, electronic equipment andinformation products and software stored on physical media, and so on.

As referenced above, although not so limited, the invention isparticularly applicable to international trade between different nationsor jurisdictions having differences in law, currency, culture orbusiness practices, or simply being so geographically separated thatother methods of trade financing are unduly difficult. Thus, theinvention can be employed to facilitate export or import from or to theUnited States and other countries or regions, for example, Japan,Europe, Australia, Latin America and so on. While there is of course noparticular size or volume limitation to any trade transaction that maybe facilitated by the invention, it is believed that there is a greatbody of import-export transactions having values of the order of ten ormore thousands of dollars, up to several millions of dollars, many ofwhich are effected by small to medium-sized manufacturing and productioncompanies which will gain especial benefit from the novel financingmethods, instruments and systems of the invention.

In another aspect, the invention provides a trade finance managementsystem for managing and tracking the trade finance methods of theinvention. Preferably, the system is computer implemented and employsnovel software to perform its functions. The trade finance managementsystem can be operated by a third party administrator TPA, and can haveselected modules distributed or otherwise made available to the partiesto the trade finance method to enable such parties to participate inindividual aspects or steps of the method, as required. Webbed networkcommunication between the document image software and its distributedmodules (or programs) running at the several parties respective computerstations enables real time monitoring and co-ordination of the process.Webbed network communication can be effected via the Internet, anintranet or intranets or other suitable WAN, or even a LAN. Preferably,the system modules provide only such access and functionality as areneeded by an individual participant to complete their role in atransaction, to ensure confidentiality. Such controlled access may beprovided by a suitable multiple password system which gives all theparties to the transaction the ability to see at their own place ofbusiness that portion of the transaction in which they may have afinancial interest while maintaining confidentiality with respect toother portions.

As referenced above, the invention can employ document image workflowmanagement software operating through distributed applications,communicating via a LAN, the Internet or other WAN, or other suitablenetwork architecture, to manage data entry, document creation andtracking, transaction tracking, contact management and other facets ofthe workflow process. Generally the software is made available to theappropriate parties to the transaction that have data to enter, althoughprovision can be made for technically unsophisticated parties toparticipate without use of a computer. Preferably, the trade financeprocess manager, if employed, also manages data entry. The documentimage workflow software is preferably intelligent and has high-levelfunctionality to enhance the trade finance process. For example, thedocument image software can allow certain documents to be stored andpledged as collateral, and that collateral to be available to interestedparties to a transaction, to provide asset-based lending.

As described above, the pre-approved bill of exchange of the inventionevidences time-specific willingness of the buyer to pay and the buyer'sability to pay can be evidenced, if desired, using an outside agency,which may optionally provide “credit enhancement”. The combination ofwillingness to pay and ability to pay create collateral value in thepre-approved bill of exchange which is enhanced by the buyer's signedstatement of intent to pay.

The invention enables a lender, or other authorized party, to monitorthe status and development of that collateral through networked use ofthe trade finance management system.

A wide variety of optional features can be added to enhance the tradefinance method of the invention and, in some cases, the new financialinstruments disclosed herein. Such optional features can, in most cases,be computer-implemented or facilitated employing the trade financemanagement system of the invention. Some such optional features will nowbe described, using by way of illustrative example, the case of a sellerexporting from the United States to a foreign jurisdiction. Theexemplary case of a buyer importing to the United States will also bereferenced. Those of ordinary skill in the art will understand that theinvention can be similarly employed by buyers and sellers in othernations, regions or jurisdiction, in an equivalent manner, with suitablemodifications to allow for differences in law, practice and culture.Other optional features, alternatives and equivalents will also beapparent to those skilled in the art, based upon the teachings describedbelow and elsewhere herein.

Trade acceptance to banker's acceptance. In a simpler embodiment of theinvention wherein a buyer executed trade acceptance is converted to abanker's acceptance, but there is no pre-acceptance agreement with theFI/SI, a collection is made on the first and second bill of exchange,without a banker's acceptance payment by the collecting bank. Theprocess through the issuance and acceptance of the first and secondbills of exchange, steps 1-7 of FIGS. 7-8, remains the same, with thedifference that the first and second bills of exchange are made payableto the order of the exporter rather than the FI/SI. Such a process andthe financial instrument it generates, suits cash-rich exporters notfinancing work in process, or exporters whose banks will lend againstcredit-enhanced foreign receivables.

A third party administrator TPA administering or facilitating such amethod can obtain payment by drawing an accepted draft for its fees atthe time of export with a term expiring shortly after the due date ofthe 2^(nd) bill of exchange, for example, 10 days thereafter.Alternatively, the seller-exporter S can draw a draft on themselves,accept it, and send the accepted draft to an authorized representativeof seller S who may sign it where the exporter signs on the 2^(nd) Billof exchange. This will then be lodged with the bill-of-exchangecollecting bank for collection. This procedure is relatively expensiveas a transaction cost, but enables the trade finance process manager'sfees to be collected via a bill of exchange issued by the exporter,rather than employing invoices which may go through an accounts payableprocess and be referred back to an export department.

Standby Letter of Credit for Exporters.

As part of a set-up procedure for exporter-seller, it may be desirable,or the acceptance-issuing bank (the FI/SI) may require the seller toaccept some risk retention in the export process. One useful form ofrisk retention in a financing process comprising a series of individualtransactions is for the buyer or seller to furnish a standby letter ofcredit payable to the FI/SI for a small portion of the value of thetransaction series, for example, the value of a maximum of oneoutstanding transaction in the series.

When such a letter of credit is employed as bank credit enhancement inthe trade finance method of the invention, then US standby collateralfor merchandise claims can be provided in a number of convenient ways,for example by a series of pre-approved drafts which may optionally becorrelated in time and value with the series of transactions wherebyeach draft relates to a transaction and is drawn for a suitable portionof the value of the respective transaction.

The limited power of attorney between the FI/SI and the exporter, ifemployed, can call for a debit note from the FI/SI to be issued to theexporter to reflect any shortfall in payment (besides collection fees)arising from a merchandise claim, or, possibly, from non-insurabilitydue to inadvertencies such as shipment to a non approved location.Pursuant to the agreement, issuance of the shortfall debit note by theFI/SI should trigger payment.

If desired the pre-approved drafts can be credit enhanced and made outin favor of the acceptance-issuing bank. Some other optional features ofsuch claim standby drafts are that they be due a short time, e.g. 7days, after a debit note date and that they be established by agreementwith the FI/SI as part of the payment relationship.

Imports into the U.S. with Limited Retention.

In an alternative embodiment of the invention, the FI/SI can financeimports into the US on a divided payment basis with the foreign exporterreceiving a major proportion, for example 70-90 percent, of the proceedsas a pre-approved banker's acceptance, and the balance being aretention. The pre-approved banker's acceptance preferably has amaturity dated somewhat beyond the import transaction terms, for example30 days later, and could be issued by a US-based bank at US bankinginterest rates. The collateral would be a credit-enhanced US receivable.The money transaction would be between the foreign exporter's bank, orservice intermediary and the acceptance-issuing bank. Preferably, thethird party administrator TPA could electronically track and documentthe transactions and manage the money, but neither handle nor havecontrol of the money.

The retention, which in the above example would be 10-30 percent of thevalue of the import transaction, can be handled by the third partyadministrator TPA who may obtain its fee from the retention and remitthe balance of the retention to the exporter, when there is no longer apossibility of merchandise claims being made. The trade financemanagement system can enable the third party administrator TPA usingdocument imaging software to manage the process in theacceptance-issuing bank from their own remote office using multiplelevel password protection, or other means to assure both limited accessand confidentiality.

According to a further feature of the invention, one way of managingmerchandise claims that have been, or are to be, removed from thepayment cycle by agreement, is for the U.S.-based exporter-seller topre-agree with the foreign importer-buyer to hire an outside merchandiseclaims adjusting company to adjust any merchandise claims that may ariseand to abide by their findings. Alternatively, the exporter and importermay agree to hire a pre-shipment conformity assessment company to issuea certificate of conformity of the shipment with the actual or pro-formainvoice. Usually, both risk mitigation steps are charged to the expenseand risk of the exporter who also is responsible for the third partyadministrator TPA's fees.

To facilitate the process, the importer can pre-agree to limitmerchandise claims to a small proportion of the value of the shipment,for example less than 20 percent, or to bear the cost of conformityassessment in order to retain the right to make a claim for more thansay 20 percent. Importers with frequent or excessive merchandise claimsare not attractive credit risks.

In either case, merchandise claims are outside the payment mechanism bytreaty and by contract as specified in the underlying contract with boththe exporter and the importer. In the preferred methods of theinvention, both the exporter and the importer recognize by contract thattheir payment drafts or bills of exchange, are governed by internationaltreaty, for example the 1930 League of Nations or UNCITRAL.

Preferably, the exporter and importer also agree to use carriers withelectronic shipment tracking capabilities, and to allow the third partyadministrator TPA to monitor the goods in transit.

Trading Company Process.

In the case of an importing or exporting trading company expeditingshipments for a manufacturer, and which is neither a manufacturer northe ultimate user or distributor of the traded product, it is probablethat the acceptance-issuing bank will require transaction riskretention, and backup or standby collateral from the supplying partiesto the transaction.

Conventional financing methods employ either the difficult andunattractive letter of credit process or require the manufacturer toawait collection of the invoice, at term, after shipment, which may beseveral months. The methods of the invention can be used to enable amanufacturer selling through a trade intermediary to be paid promptlyafter shipment, from the proceeds of a pre-approved banker's acceptance.Provided that the trade intermediary is willing to wait for all or partof their money until the collection of payment from the buyer, in thesecond of exchange or first of exchange process, the banker's acceptancecan be issued on behalf of the trade intermediary, in favor of themanufacturing supplier in the manner previously described for theseller. Using this practice, a major proportion of the transactionvalue, for example up to about 85 percent, can be paid to themanufacturer and, depending upon the particular arrangement between themanufacturer and the trade intermediary, it is possible that thisproportional amount of the invoice value may be adequate fully toreimburse the manufacturer for his share of the transactional, thebalance, for example 15 percent, being the profit due to the tradeintermediary.

In certain such cases, a standby letter of credit from the manufacturer,or from the trade intermediary, or letters of credit from both, held bythe the acceptance-issuing institution, may be helpful, or required, toprovide backup collateral or credit enhancement. As contemplated herein,provided that a suitable triggering event can be agreed and specified inthe financial instruments, the invention can flexibly employ standbyletter-of-credit credit-enhancement, or other standby mechanisms, ifdesired, to improve the quality of those financial instruments.

A further possible requirement is for the trade intermediary to have, inhis collateral pool, accepted bills of exchange from the manufacturer toback the call for support on merchandise claims. Employing the documentimaging workflow management system described herein, theacceptance-issuing bank, the third party administrator TPA and the tradeintermediary, can all see and manage the collateral.

Draft Substitution Process with Letter-of-Credit Based CreditEnhancement.

For those instances where there is no alternative but to use a letter ofcredit, it would be desirable, in the method of the invention, toprovide a system capability to an exporter to assist the importer toinitiate a letter of credit while using the trade finance managementsystem, for example in steps 1 or 7 of FIGS. 7-8, the cost being borneby the importer.

Draft Substitution Process with Avalized Enhancement.

Where credit insurance cannot be obtained for a foreign importer(foreign to the United States, that is), alternative credit enhancementprocesses can be employed. One example of such a process employs anaval, or guarantor of payment for the transaction. Preferably, theavalor is insured, for example by the third party administrator TPA, notso much against risk of default, but to keep the claims processcoherent. Preferential insurance rates will usually be available onavalors. Other, equivalent processes for providing credit enhancementwill be apparent to those skilled in the art.

The cost of the aval would be born by the importer, and the avalor wouldbe responsible for determining their willingness to avalize any oneimporter. This function can easily be processed electronically, forexample by implementation of the TPA workflow system between the avalorand the TPA. It is possible that the avalor could also be thecorrespondent bank on the importer's export transactions.

Language.

The document imaging workflow management system screens can be producedin any desired language, and the document form can be output in anypre-determined language. For example, the system need not necessarily besetup and output in the same language, e.g. English, but could be set upin Arabic, and output in either Arabic, English or German, and viceversa. Preferably, the contents of a document field are not translatedhowever, but are in the language of the inputting country, or inEnglish, being a common keyboard business language.

As referenced above, the novel methods and instruments of the inventioncan be implemented in software, and the invention further provides noveltrade finance software for that purpose. In preferred embodiments, thetrade finance software comprises a number of modules adapted to thedifferent needs of the several parties to a trade finance transaction orto a series of transactions.

Referring now to the schematic block diagram of FIG. 12, there isillustrated the process flow of an embodiment of the trade financemethod of the invention as it might be implemented between an exporter60 domiciled in the USA, an importer 62 domiciled overseas, a thirdparty administrator TPA 64 probably, but not necessarily, domiciled inthe USA, the exporter's U.S. bank 66, an AA Bank 68, importer's bank 69and an insurance company 70.

In the preferred embodiment shown, importer 62 is equipped with a faxmachine 74, while exporter 60 and third party administrator TPA 64, aswell as banks 66, 68 and 69 and insurance company 70, are shown as beingequipped with a computer system 76. Also as shown, computer system 76comprises a desktop system unit, a suitable trade finance softwaremodule, a document scanner for reading paper documents and, optionally,for importing them into electronic files, and a WAN connection forelectronic communication with one or more of the other parties shown.Preferably, the software modules are adapted to the different needs ofthe different parties, as will be explained in more detail below. Inmany instances, depending upon the functionality desired, the scannercan be a fax machine, or internal fax board, and a preferred WANconnection is to the Internet, which connection may be effected via aLAN or intranet. Clearly, other system units can be employed, forexample laptop, palm-top, floor-mount units and so on.

The system is designed to permit an overseas importer to participatefully in the documentary workflow process, without requiring a computer,providing their input via fax, telephone, mail or equivalent. The systemcan provide a similar advantage to a U.S.-based importer buying from oneor more overseas exporters, some of whom may have less technologicallysophisticated facilities, yet who can fully participate in the methodsof the invention without needing a computer or Internet connection.However, at such time as a computerless participant becomescomputer-enabled, preferably with an Internet connection, they canparticipate electronically, further enhancing the process with timereductions and the like.

In general, it is desirable to avoid having to supply proprietarysoftware to an overseas party to the transaction, although, in certaincases, this may be done. For example if a long relationship isanticipated with the overseas party, or a series of transactions iscontemplated, a transaction is particularly complex, or simply if theoverseas party prefers or is willing to computer-implement their role inthe transaction.

Also, in general, it is preferred that the seller's role becomputer-implemented, because as set forth in the preferred aspects ofthe invention, the seller will usually play the greater role in thepreparation of documents. However, it will be understood that theseconsiderations could be reversed, especially for a sophisticatedimporter in a major industrial country obtaining supplies from a numberof technologically less sophisticated overseas exporters.

In such case the importer may play the major role in the process and beequipped with a trade finance software module. Such a sophisticatedimporter may also generate one or more purchase orders embodying therelevant sales agreement terms, as described herein, rather thanpro-forma invoices.

Similarly, banks 66, 68 and 69, and credit insurer 70 are shown ascomputer-equipped because such institutions will usually be computerequipped, it is nevertheless possible, but less preferred, for them toparticipate in the process of the invention, withoutcomputer-implementing their role.

Where a third party administrator is employed, it is strongly preferredthat such administrator computer-implement their role and assume asignificant role in document preparation. Nevertheless implementation ofthe process of the invention can be facilitated if an exporter, orpossibly an importer, domestic to the third party administrator alsocomputer-implements their role. Thus, as between the buyer and seller,it is a notable feature of the software-implemented process of theinvention that only one of the parties to the transaction need becomputer-enabled. This feature is a significant advantage over processesrequiring computer participation by both parties. Because of itsflexibility in this respect, widespread deployment of the invention doesnot depend upon the creation of a critical mass of computer-literateimport or export traders.

It will also be understood by those skilled in the art that the tradefinance method of the invention can be computer-implemented using, as analternative to the trade finance software modules described herein,off-the-shelf software applications for document preparation andcommunication, for example word processor or office suite packages, oravailable forms processing or document imaging applications and knownnetwork or other communications software. Furthermore, suchoff-the-shelf applications may have capabilities enabling them to beadapted to provide a trade finance software module according to theinvention herein and the invention includes such adaptations ofoff-the-shelf packages.

It will be appreciated, by those of ordinary skill in the art, that theequipment shown is merely suggestive and that the several parties mayhave other equipment additional to, or in place of, that shown whichthey employ to participate in the trade finance process of theinvention. Also, alternative communication modes to a WAN may beemployed, for example modem connection via the telephone network andthat the scanner is merely suggestive of an input device that can beused to interpret hard copy documents or other information objects intoa suitable electric electronic form for computer input. Each computer isalso equipped with such peripherals as are customary or desired,especially a suitable high-quality printer for outputting documentsusable as financial instruments.

The trade finance software module is preferably a customized proprietarymodule designed to implement the method and instruments of the inventionand it includes suitable screens, screen devices, data retrieval, dataentry means and programme procedures and features to effect those stepsof the methods described herein as are computerizable and also to createthe documents and instruments described herein. The software modules arestored in computer media at the individual stations, as is known tothose of ordinary skill in the art, for example on hard drives of therespective systems for loading into RAM. The software modules can bedistributed by CD-ROM, diskettes, remote downloading or other meansknown to those skilled in the art. When loaded to computer RAM, thetrade finance software modules provide a customized trade financebusiness machine. The system depicted in FIG. 10 provides a plurality ofsuch machines cooperative with one another to facilitate or perform themethod of the invention.

Preferably, the computer modules can talk to one another using Internetprotocol or other suitable wide area network format. However, sinceInternet and other WAN communication is in essence, usually anon-confidential broadcast of information, it is preferred thatsensitive data be suitably encoded and transmitted in theirnon-broadcast format, for example by file transfer using FTP or thelike.

Preferably, each party's software module provides only so much programcapability and data access as is appropriate to that party's role in thetransaction. Though shown communicating only with exporter 60, importer62 and insurance company 70, third party administrator TPA 64 can byagreement also communicate with and be privy to relevant transactionactivities at exporter's U.S. bank 66, AA bank 68 and importer's bank69. Third party administrator 64, and possibly also exporter 60, can be,and preferably is, the only party who sees all facets of the tradetransaction and its financing.

Systems such as that shown schematically in FIG. 12 can be used toimplement financing methods such as, or generally similar to, thatdescribed with reference to FIGS. 7 and 8. A preferred method commenceswith an exporter 60, who might be seller S in the method shown in FIGS.7 and 8, preparing and issuing a pro forma invoice PFI and a first ofexchange 1oE, and sending the documents to the overseas importer 62,buyer B in the method shown in FIGS. 7 and 8, optionally, with theassistance of third party administrator 64. Use of third partyadministrator 64 to facilitate the method of the invention isparticularly preferred for the coordination, control, experience andhistory records that third party administrator 64 can bring to theprocess. In particular, it is furthermore preferred that third partyadministrator 64 uniquely identify the exporter 60 and importer 62,employing a recognized third party code, for example a DUNS No., aproprietary number created and maintained by Dun & Bradstreet, for whichpurpose third party administrator 64 may have an online or Internetconnection with Dun & Bradstreet, or a comparable organization.Alternatively, other unique identifiers such as a tax identificationnumber or company registration number may be used. Where no suchidentification code exists for the exporter or importer, third partyadministrator 64 can complete the process of issuing a new code onbehalf of the exporter or importer.

Preferably also, the pro-forma invoice and 1oE documents are preparedelectronically, and they can also be transmitted to importer 62electronically. However, at present, it is preferred that thebuyer-executed documents be hard copy paper documents originals of whichare returned to exporter 60 by mail or courier. However, it iscontemplated that fax signatures may soon be acceptable, even for thetransaction-initiating documents, and the invention accordingly includesmethods wherein executed documents are transmitted by fax.

As discussed hereinabove, at a future date, electronic or equivalentauthentication may be acceptable permitting electronic communication ofthe documents, or a faxed signature may be acceptable.

If desired, third party administrator 64 can obtain credit insurance, toenhance the collateral in the 1oE, from insurance company 70. In manycases, obtaining credit insurance on the importer will avoid the needfor other collateral or credit enhancement, such as a letter of credit.

In due course, after receipt of the executed pro-forma invoice and 1oE,exporter 60 releases the goods to a shipper and forwards the 2oE and theinvoice to importer's bank 69. In return for importer 62's signature onthe 2oE, his bank 69 releases the invoice to importer 62, enablingimporter 62 to to clear the goods from customs. This process is anexample of what is sometimes called a document-against-acceptanceprocess, often abbreviated “D/A” in the banking industry, in which theinvoice document is released by bank 69 against importer 62's acceptanceof the 2oE indicated by importer 62's signature on the 2oE. Again, atthe present time it is preferred that both the executed originals of the2oE and the invoice be paper documents. However, the signed originalscan be electronically scanned providing an electronic record ofexecution of the documents, quickly indicating progress of thetransaction and possibly also providing electronic evidence that may beacceptable as proof of such progress. Since the process is secured bythe 1oE, it may be fully electronic third party administrator cancapture the details of the 2oE as they are created, employing thedesktop workflow document image management system described herein, asthey are scanned or faxed.

Exporter 60 then submits evidence of the issuance of the 2oE along withverification of shipment, or of release of the goods to the shipper, inpaper or electronic form, as required, to a bank 68 with whom exporter60 has previously executed a draft substitution or conversion agreement.In the event of non-acceptance of the 2oE, which non-acceptance can benotified through the banking system's mechanism for reportingexceptions, the collateral represented by the 1oE enables a hard orelectronic copy of the 1oE to be presented for payment, along withevidence of its activation, to the importer's bank.

Pursuant to the draft substitution agreement, bank 68 promptly issues apre-approved banker's acceptance, which exporter 60 can readily cash athis bank 66. At or before maturity of the 2oE, bank 68 collects aremittance from importer 62.

Because the 1oE exists as collateral, requiring only the physicalwaybill to trigger it, the draft substituting bank, the FI/SI, can relyon the dispatch of the 2oE to issue substitution documents because thegoods are effectively prepaid and there is a mechanism within thebanking industry's for document-against-acceptance terms to reportnon-acceptance or non-payment.

Referring now to FIG. 13, the method shown illustrates, by way ofexample, the role that can be played by a third party administrator TPAto facilitate financing of a single transaction import-exporttransaction between an exporter E, being a client of third partyadministrator TPA, and an importer I in another country or region. Themethod is well adapted for managing or administering numeroustransactions between a client base of exporters and multifariousimporters around the world. Preferably the method iscomputer-implemented, to the extent described above with reference toFIG. 12, and employs document imaging workflow management software, atleast in the office of the third party administrator TPA and preferablyalso at the office of exporter E. Preferably also, third partyadministrator TPA assumes a lead role in document preparation andgeneration, although in some cases, more skilled exporters E may alsocreate, generate, or issue some or all of the documents pursuant to theinvention, preferably employing a module of the workflow managementsoftware. Employing such cooperative software modules, that facilitatecommunication of documents between the parties and permit easy markupsand edits to be exchanged, third party administrator TPA and exporter Ecan work together as a team to complete the paperwork and effect thefinancing method of the invention in an efficient manner. It will beunderstood that many of the steps described hereinbelow as beingperformed by one of the parties could in fact be performed, in whole orin part, by the other, preferably employing a trade finance managementsoftware module according to the invention. In general, it may beexpected that third party administrator TPA will assume a major role indocument preparation for smaller or less experienced exportersl, whilelarger or more experienced exporters, especially after gainingexperience and familiarity with the methods, instruments and systems ofthe invention, may prefer to prepare their own documents with minimalassistance from third party administrator TPA.

The method commences, in step 80, with exporter E furnishing to thirdparty administrator TPA, transaction information regarding animport-export transaction which has been agreed with an importer I forthe purchase from exporter E of a traded product, for example a shipmentof manufactured goods. The transaction information includes the identityof the importer, the value of the transaction and further detailedinformation regarding the product to be shipped, the timing and anyother relevant factors, as appropriate or desired.

In step 82 third party administrator TPA obtains or creates a uniqueidentification number for exporter E, for example a DUNS number, asreferenced above, tax identification, company registration, or othernumber. Where no such number is available, third party administrator TPAcan help exporter E apply for a new number, step 84, and may make therequest to an issuer of such identification numbers, for example to Dun& Bradtreet on behalf of the exporter, providing a service to exporter Ein this respect, while at the same time compiling an accurate profilerecord of exporter E on third party administrator TPA's files. Wheremultiple numbers are available from the number issuer for a givenexporter, third party administrator TPA can select one, optionally withthe assistance of exporter, E. If desired, third party administrator TPAcan additionally, or alternatively, issue its own identifier for theexporter, after appropriate verification of essential particulars.

After exporter E has been properly identified, in step 86 anidentification number is preferably also obtained for importer I using asimilar procedure and, if necessary, applying for a new number forimporter I, step 87. Where importer I is relatively small, yetcreditworthy, or in a relatively small or less developed country, auseful identification number may not be sufficiently readily availablefrom an outside organization, in which case third party administratorTPA can create its own identifier to good effect.

Clearly, where third party administrator TPA already has a computerrecord for exporter E, from a prior transaction or importer I, orelsewhere, that data may be accessed, avoiding the need for step 82 orstep 86, or both. However, care should be taken to update theinformation for changes of physical or communications addresses or thelike. One way of effecting such updates is by automated online access toa source database of such information, preferably, when the record isrequested.

Coordinating unique identification of both exporter E and importer Ienables third party administrator TPA to identify legal as well asoperational locations and to obtain enhanced control over animport-export transaction avoiding errors attributable to mistakenidentities or locations, and with proper verification of the input dataand taking advantage of the consistency of computer processing, datainconsistencies that may inconvenience, or seriously disrupt completionof a trade, can be avoided or reduced. Similarly, the quality of thedocuments created or issued by, or to, third party administrator TPA,for example the first of exchange, second of exchange and the pro-form ainvoice, is enhanced by careful verification of the source data. Withtime, third party administrator TPA can build a valuable databasecapable of greatly enhancing import-export trade transactions byefficiently and reliably generating high quality documents.

Having established identifiers for exporter E and importer I, thirdparty administrator TPA, now requests credit approval on importer I forthe transaction, from an export credit bank, credit agency or otherinstitution, step 88. In the event of no approval, the importer can berequested to finance the transaction with an advance commitment, forexample, with a letter of credit, or cash before delivery or the like,step 89. In such case tba, can either withdraw from the process, oralternatively, and preferably, can employ their knowledge gainedregarding the transaction to facilitate preparation and processing ofthe letter of credit or other payment document and provide anadministration and monitoring role regarding same.

In step 90, third party administrator TPA notifies exporter E of theinformation gathered regarding importer I, and of the approval orotherwise of importer I's credit. If desired, importer I's complete fileparticulars can be forwarded to exporter E. Alternatively exporter Eseek credit approval on importer I, after receiving this data, andadvise third party administrator TPA of the outcome.

In step 92, third party administrator TPA, in anticipation of obtainingfrom importer I a trade acceptance by way of payment for the goods to beimported, seeks pre-approval from financial institution FI/SI of theprospective later conversion of a trade draft accepted by importer I toa banker's acceptance. Preferably, for quality of the instrument, FI/SIis a bank with at least an A rating with Standard & Poor's, Moody's oran equivalent rating agency. Whether or not FI/SI pre-approves importerI's trade acceptance for conversion, in connection with the contemplatedtransaction, determines the choice of processing subsequently in themethod. If required by financial institution FI/SI, the request forpre-approval of draft conversion can be a written application executedby exporter E, or less probably by third party administrator TPA onbehalf of exporter E. The draft conversion request can recite a specificamount for the anticipated value of a particular trade, or it may recitea credit line amount which can be drawn down in a series of tradesbetween importer I and exporter E, or possibly, between importer I and anumber of exporters, and replenished for further use, as payments fromimporter I reach financial institution FI/SI. Preferably, financialinstitution FI/SI issues a signed approval which is held by third partyadministrator TPA or, optionally, passed to exporter E.

In step 94, being notified that importer I is at least minimallycreditworthy, exporter E offers importer I a selection of paymentchoices. The choices preferably include options to proceed withconventional financing, for example factoring or forfaiting, with atrade draft accepted by importer I, or to proceeed simply by paying inadvance, before shipment of the goods, and more preferably include oneor more options for adopting the financing method of the invention,employing a pre-release trade draft accepted by importer I prior torelease of goods by exporter E. In this latter preferred embodiment,employing the pre-release trade draft process, reference will be made toimplementation with a first of exchange, a second of exchange and apro-form a invoice, as described herein, it being understood thatvariations and alternatives to these instruments are possible, some ofwhich are also described herein.

If importer I prefers and selects other conventional financing methods,step 95, such conventional or quasi-conventional methods may optionallybe effected with the assistance of third party administrator TPA,employing data and know-how regarding the transaction and the partiesthereto, that have already been acquired and that are thereforeavailable to third party administrator TPA for preparation of documents,queries and so on.

In the embodiment shown, when importer I selects a trade acceptancepayment method they have the further option of choosing to employ thepre-release method of the invention, step 96. If importer I declines thepre-release method, optional step 98 can be taken to enhance I's credit,for example with a standby letter of credit or an aval, and otherprocessing steps can then be taken to finance or obtain advance paymentfor the transaction, step 100, for example, forfaiting, an alternativeguarantor method, or reverting to a letter of credit. Once again, suchother processing steps 100 can also be effected with the assistance ofthird party administrator TPA.

In step 102, third party administrator TPA issues a pre-release tradedraft which when signed and accepted by importer I, will become a tradeacceptance TA. Preferably the draft is a latent bill of exchange havinga term initiated by a specific future triggering event which, by way ofexample, can be the date of release by exporter E, to a shipper, of thegoods constituting the traded product. The latent draft is dormant untilactivated by that release of goods, whereupon its term, e.g. 60 daysbegins to run. The tenor of the draft is thus 60 days from release ofthe goods. Pursuant to the inventive financing method, it is preferredthat the bill of exchange be a first of exchange, 1oE, mutuallyextinguishable with a second of exchange, 2oE.

In step 104 exporter E prepares a pro forma invoice PFI containingagreements to pay with payment drafts and to remove the right ofrecourse from the payment cycle, as described herein. Exporter E sendsthe pro forma invoice along with the 1oE received from third partyadministrator TPA to importer I with a request for the documents to besigned indicating acceptance of their terms and conditions, and returnedto exporter E. depending upon the urgency of the transaction, thedocuments can be forwarded from exporter E to importer I by courier,mail or fax. Where importer I is Internet-enabled, the documents can betransmitted as electronic files, for example as email attachments, ifdesired or by pulling the file as a download from a web site maintainedby the exporter, or third party administrator TPA, to the importer.Alternatively, importer I can be emailed to retrieve the file by FTPdownload from the exporter or third party administrator TPA web site.

In step 106 “Y” if importer I signs the 1oE and pro forma invoice PFI,indicating acceptance of the terms of both documents, and returns themto exporter E, then exporter E sends the signed 1oE to third partyadministrator TPA, retaining the executed pro-forma invoice, step 108.If importer I declines to sign and return the 1oE and pro-forma invoice,step 106, “N” option, then other processing steps can be taken tofinance or obtain advance payment for the transaction, step 110,preferably with the assistance of third party administrator TPA.

Third party administrator TPA holds the 1oE, step 112, until notified ofthe triggering event, the release of goods, by exporter E.

In due course, when the goods are ready, or at a time agreed withimporter I, exporter E releases the goods to a shipper for delivery toimporter I, and notifies third party administrator TPA of the release,and will preferably provide third party administrator TPA with a uniqueidentifier code created by the carrier to evidence shipment, or withcopies of the shipping documents, which may optionally embody the code,step 114. Such copies may be transmitted electronically, if the partiesdesire, after scanning, if necessary. At the time of shipment, exporterE prepares an invoice and second of exchange, 2oE, step 116. Assumingthat by now exporter E knows the date on which the goods will bereleased to the shipper, which is the event date triggering the 1oE,then an actual future date certain can be entered on the 2oE for theterm thereof, which date will be the maturity date of the 1oE calculatedby adding its stated term to the date of the triggering event.

In step 118, exporter E sends the invoice and 2oE to importer I's bankwith a request for I's bank to obtain acceptance of the 2oE by importerI against release of the invoice. As of spring 1999 it is to be expectedthat original hard copy paper documents will be required by importer Iand their bank so that the invoice and 2oE will be forwarded by courier,or mail, depending upon time constraints, the value of the shipment andand whether it is being carried by sea or air. When regulations andpractice permit these documents may be forwarded by fax, Internet orother network. Preferably, exporter E also copies the 2oE and theinvoice to third party administrator TPA, which step may be effectedelectronically, if desired.

In step 120 third party administrator TPA applies the results of therequest for FI/SI approval of the draft conversion process in step 92.If pre-approval has been received, option 120 “Y”, third partyadministrator TPA initiates the draft conversion process, step 122, andnotifies FI/SI that an accepted draft for conversion has been received,the 1oE, and that the banker's acceptance will be requested as soon asthe triggering event occurs to activate the draft.

If FI/SI has declined to approve the conversion, step 120 “N”, themethod proceeds via other processing with third party administrator TPA,step 110. At this point, third party administrator TPA holds a tradeacceptance on importer I with a future maturity date according to thestated term of the 1oE from the data of release of goods to the shipper.The 1oE may be returned to exporter E or held by third partyadministrator TPA as collateral pending acceptance of the 2oE byimporter I. Depending on its quality, which will be largely determinedby the reputation of importer I, the 1oE may or may not be discountableon the open market. At maturity, the holder, who may be exporter E,third party administrator TPA or another party, collects payment ofeither the 1oE or 2oE, of the from importer I's bank rather than FI/SI.

In step 124 third party administrator TPA verifies the accuracy of theshipment information provided. Inconsistencies can be referred back toexporter E for clarification or correction. Optionally, and if theshipping documents are in order, third party administrator TPA can, instep 128, buy insurance on a 1oE from a credit insurance carrier 130.While third party administrator TPA can be reimbursed in various waysfor their fees and expenses, one convenient way is for the cost ofcredit insurance and the like to be deducted from the proceeds of the1oE/2oE before they are paid to exporter E.

In step 132 third party administrator TPA makes available in actual orvisual form the 1oE to financial institution FI/SI with verification orproof of shipment, or verification or proof of release of goods forshipment, and requests that FI/SI issue the pre-approved bankersacceptance and substitute same for the 1oE, Because this draftconversion process has been pre-approved in steps 62 and 120 “Y”, itwill usually proceed automatically, provided that the papers are inorder. Therefore, in step 134, FI/SI prepares the banker's acceptanceand sends it to the exporter's designated bank, for example, an exportcredit bank ECB. The banker's acceptance will usually be for the faceamount of the invoice, less applicable payment discounts, and will havea term expiring no earlier than the maturity date of the 1oE and 2oE andpossibly expiring up to about 30 days later. This additional time allowsfor collection of payment from importer I by his bank and transmissionof the payment through the banking system.

In step 136 export credit bank ECB pays the exporter the invoiced valueof the goods less fees and commissions. In step 138, promptly aftersending the banker's acceptance to export credit bank ECB, FI/SIcontacts importer I's bank to arrange payment of the 1oE. Export creditbank ECB can hold the banker's acceptance to maturity, or sell it at adiscount to a holder in due course.

If importer I accepts the 2oE, as expected, step 140 “Y”, then at thematurity date of the draft, the 2oE, I funds his account at his bank,step 142. On the maturity date I's bank debits I's account for theamount of the 2oE. The maturity date may, for example, be 60 days afterthe triggering event, the release of goods in step 114. In due course,perhaps as much as another 30 days, I's bank pays financial institutionFI/SI for the 1oE, step 146, and, upon presentation at its maturity,financial institution FI/SI pays export control bank ECB for thebanker's acceptance.

If importer I declines to accept the 2oE, step 140 “N”, then third partyadministrator TPA obtains the waybill and invoice from exporter E andforwards same to financial institution FI/SI, step 150. Financialinstitution FI/SI attaches the original executed 1oE, step 152, andsends the documents to I's bank, requesting payment of the now-matured1oE, step 154. The waybill and invoice evidence release of the goods instep 114 and thus, the activity of the draft. If the documents are inorder, I's bank debits I's account and pays FI/SI for the 1oE.

In a modified embodiment of the system and process described withreference to FIG. 10, the functions of exporter's bank 66 and AA bank 68are performed by an international credit card company, for exampleMasterCard Visa or American Express, (all of which are trademarks). Theinstitutions supporting such credit card services are well placed toparticipate effectively in the trade financing methods of the inventionby virtue of their worldwide credit databases providing creditinformation on a large number of individuals and businesses in manydifferent countries and their capability readily to processinternational transactions. Some modification of their existing businesspractices, and possibly, development of new services may be desirable,given that conventional credit card transactions are for relativelysmall amounts at relatively high interest rates as compared with therequirements of import-export financing. Import-export finance services,participating in the practice of the methods of the present invention,could be offered by a new division, a subsidiary, or joint venture of acredit card company specifically catering to trade finance needs andproviding financing for preferred customers for limited periods suitableto trade finance at significantly lower interest rates than thecustomary rather high conventional credit card rates. Such a credit cardcompany subsidiary or division could take over many or all of thefunctions of TBA 64. Probably different office or agents of the creditcard company, but operating under its aegis or license may handledifferent aspects of the transaction, exporter relationship, importerrelationship, currency exchange, and so on. Use of a credit card companyin this way provides an elegant solution to the problem of financing atransaction across national borders. The simplification of paperwork andother advantages of the trade financing methods, instruments and systemsof the invention can help bring import-export financing withing reach ofan international credit card issuing company.

Such a modified embodiment of the invention is illustrated in FIG. 11where credit card company subsidiary 72 is shown as providing exporter60 a cash remittance in exchange for the 2oE and proof of release ofgoods and receives a remittance from importer 62. Optionally, the creditcard company subsidiary can process the pro forma invoice and first ofexchange in response to exporter 60's request. No process ofsubstitution of the trade acceptance for a banker's acceptance isnecessary as the credit card company's subsidiary is able to rely uponthe parent credit card company's own verification of the credit statusof importer 62 and, in all probability a trustworthy credit history,failing which the credit card company would not have authorized thetransaction in the first place.

The computer screen illustrated in FIG. 17 is illustrative of manypossible ways of computerizing a procedure for practicing the method ofthe invention. Many other ways will be apparent to those skilled in theart. The screen shown illustrates a module or procedure of a documentimage work flow management system suitable for use at the office of anexporter. Other modules for other participants can reflect activitiesappropriate for such other participant. Referring to FIG. 17, a user hashighlighted an activity 200 “Produce first of Exchange” to select thatactivity from an activity list 202 on the left-hand side of the screen.Acitivty list 202 lists various process steps, some examples of whichmay be read from the figure, of one embodiment of the inventive method,which steps may be effected, facilitated or observed by the third partyadministrator TPA. An activity information window 204 on the right handside of the screen displays available information regarding the activity“Produce first of Exchange” and permits editing and data entry, asrequired. Other activities shown in activity list 202 may be similarlyprocessed. A horizontal menu bar 206 across the top of the screenprovides access to other processing capabilities, as may be understoodby reading the figure. Of note is “documents” button 208 which providesaccess to scanned images of the documents employed in the financingprocess.

Internet Implementation.

The methods and instruments of this invention are well suited to takeadvantage of the Internet's ubiquity, communications efficiency,constant desktop avialability and ease of use, to facilitate the conductand growth in number of import-export trade transactions. Thus,operating through one or more web sites, a third party administrator canexpedite individual trade transactions, permit any authorized partyanywhere with Internet access to track progress of one or moreimport-export trade transactions, serve as a focus to catalyze themaking of new trades by bringing together importers, exporters, financeproviders, insurers, shippers, expediters, and any other party to animport-export transaction.

Employing customary ISP client access or operating through their own websites, parties to a trade transaction, for example the exporter orimporter, can utilize the methods, instruments or software or otherimplementing systems of the invention to conduct many of these functionson their own behalf. It is envisaged, however, that a skilled thirdparty administrator TPA will, in time, with the experience of adiversity of trade transactions, build a reservoir of data, knowhow andcontacts that can be communicated and administered via the Internet, orother suitable communications medium, to the benefit of many exporters,importers and other traders, regardless of their size and experience.

Thus the novel financing instruments described herein can becommunicated via fax or via the Internet, according to the needs andpreferences of the parties, with the expectation that more sophisticatedexporters and importers. The herein described document adaptations,pursuant to the invention, permitting single-sided scanning of executedand endorsed documents are of particular value in enabling consummationof trade financing transactions via the Internet. Several options areavailable for Internet transmission of editable or signable documents.

INDUSTRIAL APPLICABILITY

The present invention is particularly suitable for application inimporting and exporting industries providing advantageous financing ofinternational trade transactions. Many of the invention process stepscan be implemented in software running on a computer system, providing aspecial-purpose machine for managing trade financing. To meetpresent-day legal and jurisdictional requirements for bills of exchangeto be embodied as paper documents, electronic systems for implementingthe methods and instruments of the invention preferably includecapabilities for scanning, indexing, storing, retrieving and outputtinga combination of electronic images and electronic data.

In addition to goods and services, for example manufactured goods andcommercially delivered services such as insurance, carriage,construction, financial professional and consulting services, it will beunderstood that the traded product may comprise other artifacts of mansuch as fixed structures or buildings, commercial and industrialbuildings and facilities, land, artworks or any other product that maybe bought and sold. Although, not so restricted, the invention isparticularly useful where the buyer and seller are physically separatedfrom one another at one or more relevant times in the transactionprocess, and especially where the traded product is carried, performed,or otherwise delivered to the buyer by another party than the seller. Inthe case, for example, of the sale of a house, will be understood thatalthough the buyer and seller may be together at the house itself, themovies separated at other times the course of the transaction and canbenefit from the invention. Thus, the invention is generally applicableto any transaction of adequate value, where the ability to provide timefor the buyer to pay while protecting the seller from risk is helpful.

While illustrative embodiments of the invention have been describedabove, it is, of course, understood that various modifications will beapparent to those of ordinary skill in the art. Many such modificationsare contemplated as being within the spirit and scope of the invention.

The invention claimed is:
 1. A method of effecting payment in acommercial transaction wherein a product is traded from a seller to abuyer, the method comprising generating a bill of exchange by acomputer, the bill of exchange being issued by the seller, beingaccepted by the buyer, being payable to the order of the seller at afirst financial institution at a certain future date related to atriggering event recited in the bill of exchange, being drawn on thebuyer at a second financial institution, and becoming a negotiableinstrument that is negotiable without reference to the commercialtransaction upon occurrence of the triggering event, and wherein themethod comprises: (a) originating the bill of exchange from anoriginator, by the computer, the originator being a party which is notthe seller; (b) signing of the bill of exchange by the buyer prior toissuance of the bill of exchange; (c) signing of the bill of exchange bythe seller after the bill of exchange has been signed by the buyer; (d)issuing of the bill of exchange by the seller, by the computer, afterthe seller and the buyer have signed the bill of exchange; and (e)negotiating the bill of exchange, by the computer, after issuance and onor after occurrence of the triggering event, to effect payment for thetraded product; wherein the bill of exchange comprises mutuallyextinguishable first and second bills of exchange, wherein a subsequentfinancial institution originates a sole bill of exchange based on thecollateral provided by the first bill of exchange before the triggeringevent and accepts the sole bill of exchange prior to signing of themutually extinguishable first and second bills of exchange by theseller, wherein the sole bill of exchange is drawn upon the subsequentfinancial institution in exchange for payment from the buyer undereither the first bill of exchange, the second bill of exchange beingunpaid, or the second bill of exchange, the first bill of exchange beingunpaid.
 2. A method according to claim 1 wherein the method furthercomprises the buyer providing, by the computer, a purchase orderreciting terms of the commercial transaction and controlling the termsof the purchase order.
 3. A method according to claim 2 wherein thebuyer comprises the originator.
 4. A method according to claim 3 whereinthe buyer comprises an importer and the seller comprises an exporter. 5.A method according to claim 2 wherein the purchase order is combinedwith the bill of exchange on a single sheet of paper or in an electronicimage or equivalent of a single sheet of paper.
 6. A method according toclaim 1, wherein the commercial transaction comprises transportation ofthe traded product from a shipping party to a receiving party whereinthe bill of exchange is originated by a transportation intermediary foracceptance by the receiving party, prior to issuance of the bill ofexchange by the shipping party, wherein the shipping party provides saidtransportation of the traded product.
 7. A method according to claim 1,wherein the originator of the bill of exchange is a financialintermediary and the method comprises the financial intermediaryproviding, by computer, the bill of exchange for signing to the buyertogether with documents identifying the commercial transaction prior toissuance of the bill of exchange.
 8. A method according to claim 1wherein the commercial transaction includes an agreement between thebuyer and the seller that variances can be made to the commercialtransaction by the buyer and the seller changing at least one documentdefining the transaction and by the changed at least one document beingagreed by the buyer and seller re-initiating the transaction.
 9. Amethod according to claim 8 wherein the changed at least one document isagreed to by the buyer and seller by a communications protocolcomprising one or more communications protocols selected from the groupconsisting of fax, email, email attachments and online communication.10. A method according to claim 1 comprising credit enhancing theaccepted bill of exchange, by employing a credit enhancement selectedfrom the group consisting of an aval, a guarantee, a letter of credit,collateralization, substitution of a banker's acceptance for the bill ofexchange after acceptance by the buyer and combinations of two or moreof the foregoing credit enhancements, and by indicating the creditenhancement on or with the bill of exchange.
 11. A method according toclaim 1 comprising employing a transaction window on the bill ofexchange, the transaction window containing one or more documentidentifiers to identify documents employed in the commercialtransaction, wherein the one or more documents identified comprise atleast the contract defining the commercial transaction.
 12. A methodaccording to claim 11 wherein the transaction window contains multipledocument identifiers, the method comprising employing the documentidentifiers to monitor and index the flow of documents relative to thecommercial transaction by computer for information purposes.
 13. Amethod according to claim 1 wherein the originator comprises the buyer,the first financial institution, the second financial institution,another financial institution, a financial intermediary or atransportation intermediary.
 14. A method according to claim 1 whereinthe traded product comprises one or more products selected from thegroup consisting of goods, manufactured goods, services, commerciallydelivered services, insurance, carriage, construction, financialservices, professional services, consulting services, artifacts, fixedstructures, buildings, commercial buildings, industrial buildings,industrial facilities, land and artworks.
 15. A method according toclaim 1 wherein the originator obtains the signature of the buyer to thebill of exchange prior to issuance of the bill of exchange; wherein theoriginator obtains the signature of the seller, as issuer, to the billof exchange after the bill of exchange has been signed by the buyer; andwherein the originator negotiates the bill of exchange after issuanceand on or after the occurrence of the triggering event to effect paymentfor the traded product.
 16. A method according to claim 1 wherein thetriggering event is selected from the group of events consisting ofrelease of the traded product by the seller, delivery of the tradedproduct to the buyer, availability of specified funds to the buyer,availability of the proceeds of an asset sale to the buyer, and, in thecase of a manufactured traded product, progress of manufacture of thetraded product to an agreed stage of manufacture, the certain futuredate, performance of a service and delivery of a service.
 17. A methodof effecting payment in a commercial transaction wherein a product istraded from a seller to a buyer, the method comprising generating a billof exchange by a computer, the bill of exchange being issued by theseller, being accepted by the buyer, being payable to the order of theseller at a first financial institution at a certain future date relatedto a triggering event recited in the bill of exchange, being drawn onthe buyer at a second financial institution, and becoming a negotiableinstrument that is negotiable without reference to the commercialtransaction upon occurrence of the triggering event, and wherein themethod comprises: (a) originating the bill of exchange from anoriginator, by the computer, the originator being a party which is notthe seller; (b) signing of the bill of exchange by the buyer prior toissuance of the bill of exchange; (c) signing of the bill of exchange bythe seller after the bill of exchange has been signed by the buyer; (d)issuing of the bill of exchange by the seller, by the computer, afterthe seller and the buyer have signed the bill of exchange; and (e)negotiating the bill of exchange, by computer, after issuance and on orafter occurrence of the triggering event, to effect payment for thetraded product wherein the certain future date is specified in the billof exchange as being at the end of a term commencing with the occurrenceof the specified triggering event, and wherein the bill of exchange isissued and accepted before the specified triggering event, the methodcomprising calculating the term of the bill of exchange from thetriggering event by computer and negotiating the bill of exchange bycomputer without further reference to the status of the commercialtransaction.